A securities class action on behalf of all persons and entities who purchased or acquired shares of loanDepot, Inc. (NYSE: LDI) pursuant or traceable to the Company’s Registration Statement and Prospectus (together, the “Offering Documents”) issued in connection with the Company’s February 16, 2021 initial public offering ("IPO") has partially survived a motion to dismiss.

The Complaint alleges that the Registration Statement and Prospectus incorporated therein (collectively, the “Registration Statement”) issued in connection with the IPO contained materially incorrect or misleading statements and/or omitted material information. Specifically, the Complaint alleges Defendants failed to disclose to investors: (1) that the Company’s refinance originations had already declined substantially at the time of the IPO due to industry overcapacity and increased competition; (2) that the Company’s gain-on-sale margins had already declined substantially at the time of the IPO; (3) that, as a result, the Company’s revenue and growth would be negatively impacted; and (4) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.

Plaintiffs’ claims in the underlying action stem from three events. First, it is alleged that in the run-up to the IPO, loanDepot engaged in an undisclosed scheme to close loans without the required documentation, in violation of regulations, laws, and contractual provisions. Second, it is alleged that loanDepot improperly collected double daily interest from refinance borrowers and, upon discovery of the erroneous double collection, made the decision to refund customers only in states with active attorneys general. Finally, it is alleged that loanDepot experienced declining gain-on-sale margins as the IPO approached.

The court in the underlying case found that plaintiffs allegations “adequately supports an inference that loanDepot engaged in a concerted effort to close loans without sufficient documentation” and “Plaintiffs have sufficiently alleged wrongdoing in loanDepot’s loan origination procedures to survive the motion to dismiss stage.” Moreover “Plaintiffs have pleaded sufficient facts showing that members of management . . .  knew that at least some of [these] allegations had merit.” Here, Plaintiffs have alleged a sufficient causal connection between the fraud and the drop in stock prices to show proximate causation at this stage of the litigation.

Current shareholders who have held loanDepot stock since on or before March 16, 2021, can seek corporate reforms, the return of funds spent defending litigation back to the company, and a court approved incentive award, at no cost to them.

If you would like to learn more about this matter, you are encouraged to contact us at jgrabar@grabarlaw.com, or call 267-507-6085.