SHAREHOLDER ALERT: Pomerantz Law Firm Reminds Shareholders with Losses on their Investment in Vroom, Inc. of Class Action Lawsuit and Upcoming Deadline – VRM

NEW YORK, May 08, 2021 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against Vroom, Inc. (“Vroom” or the “Company”) (NASDAQ: VRM) and certain of its officers. The class action, filed in the United States District Court for the Southern District of New York, and docketed under 21-cv-03296, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Vroom securities between June 9, 2020 and March 3, 2021, both dates inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”).

If you are a shareholder who purchased Vroom securities during the Class Period, you have until May 21, 2021 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at newaction@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.

[Click here for information about joining the class action]

Vroom was founded in 2013 and is based in New York, New York. The Company is an ecommerce platform that buys and sells used vehicles. Through the Company’s online platform, consumers can research and select from thousands of fully reconditioned vehicles. After a vehicle is purchased, the Company provides contact-free delivery to the buyer’s driveway.

Vroom became a public company through an initial public offering on June 9, 2020 (the “IPO”). Prior to the IPO, Vroom significantly reduced its inventory to account for an expected drop in demand as a result of the COVID-19 pandemic.

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) a lack of inventory had materially constrained Vroom’s ability to increase revenues in the second quarter of 2020 and meet a surge in customer demand for online used vehicles; (ii) Vroom had slashed the average selling price per vehicle by over 15% in response to a sustained and fundamental market shift to lower-priced vehicles, and not simply because of the Company’s temporary inventory reduction activities taken earlier in the year; (iii) Vroom’s lack of adequate sales and support staff had resulted in degraded customer experiences, lost sales opportunities, and a greater than 10% increase in average days to sale for Vroom products; (iv) as a result of all the foregoing, Vroom needed to invest tens of millions of dollars in growing inventory and bolstering its sales and support and logistics networks, materially impairing the Company’s short-term profitability; (v) as a result of all the foregoing, Vroom was generating materially lower profits per vehicle and poised to suffer accelerating losses and increased negative cash flows, despite a robust online used car market; (vi) as a result of all the foregoing, Vroom’s inventory growth had far outpaced the capabilities of its existing sales and support personnel, creating a logistical bottleneck that threatened the Company’s profits, the value of its existing inventory, and its ability to achieve positive cash flows; (vii) as a result of all the foregoing, Vroom was unable to sell a significant portion of existing inventory as a result of inadequate sales personnel and overreliance on third-party sales support; (viii) as a result of all the foregoing, Vroom had been forced to mark down and liquidate existing inventory at fire sale prices; (ix) as a result of all the foregoing, Vroom was on track to miss its already disappointing fourth quarter 2020 profit and earnings guidance and such guidance lacked any reasonable basis in fact; and (x) as a result of all the foregoing, the Company’s public statements were materially false and misleading at all relevant times.

On August 12, 2020, Vroom issued a release announcing its financial results for the second quarter of 2020 (the “2Q20 Press Release”). That press release revealed that Vroom had achieved only $253.1 million in revenues for the quarter, a 3% year-over-year decline, largely as a result of a 17% decline in the average vehicle selling price per ecommerce unit. Additionally, the 2Q20 Press Release stated that Vroom only expected to achieve an average total revenue per ecommerce unit of just $23,500 for the third quarter, which represented a 25% year-over-year average product price decline. As a result of this lower average price, Vroom stated it achieved only $314 in average gross profit per ecommerce vehicle, a 75% year-over-year profit decline, and projected average gross profit per unit of only $1,600 to $1,700 for the third quarter of 2020. During the earnings call to discuss these results, Defendants essentially confirmed that the pricing pressures facing the Company were not short term but reflected a fundamental market shift toward lower-priced vehicles.

On this news, Vroom’s stock price fell $12.64 per share, or 18.32%, to close at $56.37 per share on August 13, 2020, on usually heavy trading volume of 6.8 million shares traded.

Then, on November 11, 2020, Vroom issued a release announcing its third quarter 2020 financial results. That press release stated that Vroom expected to suffer sharply higher losses in the fourth quarter of 2020, with adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) losses projected to increase from $36 million in the third quarter of 2020 to $48 million at the midpoint, a 33% sequential increase. During the accompanying earnings call, Defendants revealed that Vroom was suffering from a “bottleneck” in its sales support and needed to invest heavily in building out the Company’s sales support and logistics networks to avoid constrained growth, despite the favorable market environment.

On this news, Vroom’s stock price fell $5.31 per share, or 13.01%, to close at $35.49 per share on November 12, 2020, on unusually heavy trading volume of 9.2 million shares traded.

Finally, on March 3, 2021, Vroom issued a release announcing its fourth quarter and full year financial results (the “4Q/FY20 Press Release”). That press release was the third consecutive adverse report by the Company since going public and revealed operational issues and financial results far worse than previously disclosed to investors. For the quarter, the 4Q/FY20 Press Release stated that Vroom suffered a net loss of $60.7 million, a 42% year-over-year increase. This represented a $0.46 loss per share, which was outside the range provided by Defendants and 20% worse than the midpoint. The 4Q/FY20 Press Release also stated that Vroom suffered a $55.9 million adjusted EBITDA loss during the quarter, which was also outside the range provided by Defendants and $8 million worse than the midpoint. The 4Q/FY20 Press Release further stated that Vroom had achieved only $1,821 total gross profit per unit, which was outside the range provided by Defendants and 13% below the midpoint, and generated only $878 gross profit per vehicle, which represented a 13% decline year-over-year.

During the earnings call to discuss the results held that same day, Defendant Paul J. Hennessy (“Hennessy”), the Company’s Chief Executive Officer, revealed that Vroom was suffering from severe sales backlogs because of inadequate sales and support staff, which had materially impaired the Company’s ability to sell existing inventory. These backlogs, in addition to degrading the customer experience, had led to substantially lower gross profits per unit and caused the average days to sale per vehicle to increase 13% year-over-year to seventy-seven days. Defendants acknowledged that Vroom was operationally constrained and unable to keep up with demand because of these sales constraints, which had forced the Company to liquidate aging inventory at fire sale prices for a significantly reduced profit or even at a loss, despite a historically favorable online used car market. Defendants further revealed that Vroom’s sales deficiencies were so severe that the deficiencies would continue to constrain the Company’s profits well into the first quarter of 2021, even though Vroom had purportedly tripled its sales support staff. As Defendant Hennessy admitted, “we bought more inventory than we could actually process and that excess inventory needed to be moved in Q4 and will continue to be moved in Q1.”

Following these disclosures, Vroom’s stock price fell $12.29 per share, or 28%, to close at $31.61 per share on March 4, 2021, on unusually heavy trading volume of 19.6 million shares traded.

The Pomerantz Firm, with offices in New York, Chicago, Los Angeles, and Paris is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 80 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com

CONTACT:
Robert S. Willoughby
Pomerantz LLP
rswilloughby@pomlaw.com
888-476-6529 ext. 7980