Accusations Of Dan Gilbert Insider Trading Rattle Rocket Mortgage. Recent Court Ruling Is Sending Senior Executives Into A Frenzy
A federal judge in Detroit has green-lighted the continuation of a class action lawsuit against Rocket Companies, Rocket Holdings, Inc., chairman Dan Gilbert and Rocket CEO Jay Farner. The suit revolves around accusations of Dan Gilbert insider trading.
The civil complaint alleges company executives artificially inflated the price of Class A common stock between February 25, 2021 and May 5, 2021. Plaintiffs also say Gilbert and others publicly misrepresented numerous adverse facts.
The lawsuit alleges that Farner posted a misleading tweet in March 2021 about the company’s profitability. Plaintiffs also allege Gilbert sold $500 million in his Rocket shares within weeks of the stock plummeting 28%.
The defendants have retained Attorney Jeffrey B. Morganroth. Morganroth denies all of the allegations.
The June 2022 complaint is a consolidation of numerous cases first brought about shareholders in 2021. The lawsuit states:
“Suspiciously, Gilbert had never publicly sold a single share of Rocket stock prior to this huge insider sale. Moreover, while Company rules barred this sale because it was outside of the allowed trading window, Gilbert convinced the Board to change their own rules and open the trading window so he could make this sale.”
Did Rocket Chairman Dan Gilbert And CEO Jay Farner Mislead The Public?
The plaintiffs allege CEO Jay Farner violated the Securities Exchange Act. They claim he made seven false statements to the market about Rocket’s performance.
Plaintiffs say that during a Rocket earnings call Feb. 25, 2021, a Morgan Stanley analyst asked Farner about continuing business growth as interest rates rise.
Farner responded that Rocket is seeing strong consumer demand in the housing market. He emphasized that the housing market is the strongest that it’s been in the last decade.
On March 11, 2021, a Fox Business representative asked Farner if it was ‘good for Rocket that the pandemic were winding down.
“You know, we’re going to see interest rates tick up a little bit here. So, really, interest rates moving around are a great benefit to Rocket.
Plaintiffs also allege that on March 17, 2021, Gilbert and Farner also boasted on Twitter that the Company had increased its market share and that volume from third party originators had increased. They said this despite knowing that the pipeline was slowing.”
According to the lawsuit, Gilbert retweeted this post two days later.
The lawsuit alleges that the statement was misleading. Plaintiffs also allege Rocket had lost a large amount of business because of rival United Wholesale Mortgage. UWM said in March 2021 that they would no longer work with brokers doing business with Rocket Companies Inc.
The price of Rocket Class A common stock also dropped from $22.80 to $16.48 in the six days following the call, according to court documents.