Did you lose money on investments in Rent the Runway? If so, please visit Rent the Runway, Inc. Shareholder Class Action Lawsuit or contact Peter Allocco at (212) 951-2030 or [email protected] to discuss your rights.
NEW YORK, NY / ACCESSWIRE / November 19, 2022 / Bernstein Liebhard LLP announces that a securities class action lawsuit has been filed on behalf of investors who purchased or otherwise acquired the Class A common stock of Rent the Runway, Inc. ("RTR" or the "Company") (NASDAQ: RENT) in or traceable to the Company's October 2021 initial public offering (the "IPO"). The lawsuit was filed in the United States District Court for the Eastern District of New York and alleges violations of the Securities Act of 1933.
RTR is an e-commerce platform that allows users to rent, subscribe, or buy designer apparel and accessories. RTR offers high-end apparel such as evening wear and accessories, as well as more causal and mixed-use items such as ready-to-wear, workwear, denim, maternity, outerwear, blouses, knitwear, loungewear, jewelry, handbags, activewear, ski wear, home goods, and kidswear. RTR sources its products from over 750 luxury brand partners.
RTR's business was severely impacted by the COVID-19 pandemic, which began in March 2020. As a luxury clothing provider, RTR's sales and services suffered from stay-at-home orders and the decline in opportunities for social gatherings among its customer base. Between its fiscal 2019 and 2020, RTR's revenues declined nearly 40% to $157.5 million and its total active subscribers declined nearly 60% to 54,797 active subscribers.
On October 4, 2021, the Company filed with the SEC a registration statement on Form S-1 for the IPO, which, after several amendments, was declared effective on October 26, 2021 (the "Registration Statement"). On October 27, 2021, the Company filed with the SEC a prospectus for the IPO on Form 424B4, which incorporated and formed part of the Registration Statement (the "Prospectus"). The Registration Statement and Prospectus were used to sell to the investing public 17 million shares of RTR Class A common stock at $21 per share for $357 million in gross offering proceeds.
In the months leading up to the IPO, RTR claimed that it was experiencing a business resurgence as concerns about the COVID-19 pandemic lessened, lockdown orders ceased, and its customers engaged in more social outings. For example, the Company stated that it had grown to 111,732 active subscribers as of September 30, 2021, representing 104% growth since the beginning of fiscal year 2021. Similarly, the Registration Statement stated that during RTR's second quarter of 2021 (the quarter immediately prior to the IPO) quarterly revenues had grown to $46.7 million, representing 62% growth year-over-year.
However, the IPO's offering documents failed to disclose the following material facts: (i) Rent the Runway was continuing to face extraordinary business headwinds, such as transportation headwinds and labor wage rate increases, from the COVID-19 pandemic; (ii) Rent the Runway's active subscriber enrollments had sharply decelerated from the growth trajectory represented in the offering documents and, as a result, Rent the Runway was several months away from approaching its pre-pandemic levels of active subscriptions; (iii) Rent the Runway needed to substantially increase marketing and advertising costs from historical figures in order to attempt to grow its active subscriber network; (iv) Rent the Runway was suffering from ballooning fulfillment and transportation costs; and (v) as a result, Rent the Runway was suffering accelerating operational losses at the time of the IPO and was far less likely to achieve profitability in the near term, if ever.
On December 8, 2021, RTR issued a press release announcing the Company's financial results for its third fiscal quarter ended October 31, 2021 - i.e., the quarter during which the IPO was conducted. The release stated that RTR had suffered a quarterly net loss of $87.8 million, nearly double its loss of $44.3 million the prior year quarter. The release also stated that RTR's fulfillment expenses rose significantly to $19.2 million from $11 million the prior year quarter, a 75% increase, and that its marketing expenses increased more than tenfold from $1.4 million in the prior year quarter to $10.8 million. Additionally, the Company reported only 116,833 active subscribers at quarter's end and that it expected just 121,000 to 122,000 active subscribers for the following quarter, representing a sharp deceleration in active subscriber growth and indicating that the Company was several months away from achieving pre-pandemic active subscribers.
Then, on April 13, 2022, RTR issued a press release for its fourth fiscal quarter and year ended January 31, 2022. The release stated that the Company's active subscribers had actually declined sequentially during the quarter to just 115,240 active subscribers at quarter's end. The release also stated that the Company's fulfillment and marketing expenses remained elevated compared to historical trends at 32% and 13% of quarterly revenue, respectively.
On June 9, 2022, RTR issued a press release for its fiscal quarter ended April 30, 2022. The release again stated that the Company's fulfillment and marketing expenses remained elevated compared to historical trends at 34% and 13% of quarterly revenue, respectively.
On September 12, 2022, RTR issued a press release for its fiscal quarter ended July 31, 2022. The release stated that the Company had achieved only 124,131 active subscribers at quarter end. The release further stated that the Company had launched a restructuring plan to reduce costs that included a 24% workforce reduction - a remarkable development coming less than one year after the Company had raised $357 million from investors in the IPO.
By October 2022, the price of RTR Class A common stock had fallen below $2 per share, 90% below the price at which RTR common stock had been sold to the investing public less than one year prior. At the time of the filing of the complaint, the price of RTR Class A common stock has remained significantly below the IPO price.
If you wish to serve as lead plaintiff, you must move the Court no later than January 17, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. Your ability to share in any recovery doesn't require that you serve as lead plaintiff. If you choose to take no action, you may remain an absent class member.
If you purchased or otherwise acquired Rent the Runway Class A common stock, and/or would like to discuss your legal rights and options please visit Rent the Runway, Inc. Shareholder Class Action Lawsuit or contact Peter Allocco at (212) 951-2030 or [email protected].
Since 1993, Bernstein Liebhard LLP has recovered over $3.5 billion for its clients. In addition to representing individual investors, the Firm has been retained by some of the largest public and private pension funds in the country to monitor their assets and pursue litigation on their behalf. As a result of its success litigating hundreds of lawsuits and class actions, the Firm has been named to The National Law Journal's "Plaintiffs' Hot List" thirteen times and listed in The Legal 500 for ten consecutive years.
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SOURCE: Bernstein Liebhard LLP