Pure Cycle Corporation, a water and wastewater service provider based in Colorado, is facing a class action lawsuit filed by investors alleging violations of federal securities laws. The lawsuit alleges that Pure Cycle made false and misleading statements about its business practices, financial results, and growth prospects.
Background of Pure Cycle Corporation
Pure Cycle provides water and wastewater services to customers in the Denver metropolitan area. The company develops master-planned communities on land it owns and sells lots to homebuilders. Pure Cycle also collects monthly water and sewer fees from customers.
In 2018, Pure Cycle signed an agreement with investors to finance the construction of its Sky Ranch development. The company touted Sky Ranch as a catalyst for growth. However, the lawsuit alleges Pure Cycle failed to disclose that the growth was dependent on unsustainable business practices.
Allegations in the Class Action Lawsuit
The class action lawsuit was filed in the U.S. District Court for the District of Colorado in 2019 on behalf of investors who purchased Pure Cycle stock between May 9, 2017 and August 10, 2018.
The lawsuit alleges that Pure Cycle misled investors by:
- Falsely stating the Sky Ranch development was self-funding when it actually relied on high-risk loans
- Inflating the value of inventory and demand for its lots
- Overstating revenues by improperly recognizing tap fees before they were earned
When the truth about Pure Cycle's business practices emerged, the company's stock price dropped over 40%, harming investors.
Status of the Pure Cycle Class Action Lawsuit
The lawsuit against Pure Cycle is still ongoing. In 2021, the judge denied Pure Cycle's motion to dismiss the case, allowing it to move forward.
Pure Cycle continues to deny any wrongdoing, stating that the claims in the lawsuit are without merit. However, the company also warned that the lawsuit could divert management resources and harm its reputation.
The investors who filed the class action lawsuit are seeking compensation for their losses from the drop in Pure Cycle's stock price. The lawsuit will likely continue over the next year or more before a settlement or trial outcome is reached.
The Pure Cycle class action serves as a reminder of the risks involved in investing and the importance of performing due diligence. Investors who purchased Pure Cycle stock during the period in question may be eligible to participate in the lawsuit to recover damages. The outcome of this case will shed more light on Pure Cycle's business practices and disclosures to investors.
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