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- Suit alleges Rekor, execs made misleading statements
- Investor says Rekor didn’t disclose likelihood of new laws being passed that would expand its partnerships with states
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(Reuters) – A license plate scanning technology company has been hit with a securities class action accusing it of making misleading statements about the business’s potential for growth.
In a complaint filed in federal court in Maryland, investor Robert Keith Miller, said the company and its executives had “overstated” Rekor’s potential revenues, profitability and overall business prospects for its license plate recognition software.
Rekor Executive Vice President of Government Relations and Corporate Communications Charles Degliomini said in a statement Wednesday that “the company and defendants believe that the lawsuit is without merit, and we intend to defend it vigorously.”
Jeremy Lieberman and J. Alexander Hood II of Pomerantz, who represent Miller, did not immediately respond to requests to comment on Wednesday.
Headquartered in Columbia, Maryland, Rekor has a partnership with Oklahoma, which uses the company’s technology to scan license plates and identify uninsured vehicles, according to the complaint. Rekor earns a cut of the fines levied upon uninsured drivers identified with its technology.
Miller said the company “consistently touted” the value of the Oklahoma partnership and the company’s stock price “ballooned” because of the perception the deal was a “stepping-stone to capturing similar deals with other municipalities.”
The company, however, failed to disclose that it was unlikely that other states would pass legislation greenlighting similar partnerships, Miller alleged.
He claimed the company made positive statements in regulatory filings that the Oklahoma program would lead to partnerships with states like Tennessee, where legislation had been introduced that would allow the activity.
But when media reports began circulating in May 2021 that the bill might be dead, Rekor’s stock fell 40.45% within two days, according to the complaint.
Miller also cited research reports that alleged competitors controlled more of the market than Rekor and that the Oklahoma program wasn’t as lucrative as the company said.
The case is Miller v. Rekor Systems Inc et al, U.S. District Court for the District of Maryland, Northern Division, No. 1:21-cv-01604.
For Miller: Jeremy Lieberman and J. Alexander Hood II of Pomerantz; and Steven Toll, Daniel Sommers and S. Douglas Bunch of Cohen Milstein Sellers & Toll.
Counsel information for Rekor was not immediately available.
Sierra Jackson reports on legal matters in major mergers and acquisitions, including deal work, litigation and regulatory changes. Reach her at firstname.lastname@example.org