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Rekor Systems, Inc.

Case Details

Class Period: April 12, 2019 - May 25, 2021
Date Filed: June 29, 2021
Case Number: 1:21cv01604
Jurisdiction: Maryland District Court
icon-casetype Case Type: Securities Case
Days Left to
Seek Plaintiff:
35

Case Summary

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Rekor’s ALPR technology and UVED-related business is outclassed by global competitors with an established, dominant market share; (ii) it was unlikely that states would pass legislation authorizing deals similar to Rekor’s Oklahoma UVED partnership because of, inter alia, state and local privacy laws and related public concerns; (iii) Rekor’s UVED partnership was not as profitable as Defendants had led investors to believe because of known impediments to enrollment rates and costs associated with the partnership; (iv) accordingly, Rekor had overstated its potential revenues, profitability, and overall ALPR- and UVED-related business prospects; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times. On May 10, 2021, a bill authorizing the establishment of a state UVED program was excluded from the Texas Legislature’s Daily House Calendar and left pending in a state committee. Because May 10, 2021 was the deadline for the Texas UVED bill to move from the committee, news sources reported significant market speculation that the bill was dead. Further, on a post-market earnings call that same day to discuss Rekor’s first quarter 2021 financial results, Defendant Berman also indicated that Rekor may not secure a UVED agreement with Texas. On news of the Texas UVED bill’s exclusion from the Texas Legislature’s Daily House Calendar, Rekor’s stock price fell $5.20 per share, or 27.5%, to close at $13.71 per share on May 10, 2021. Then, following Defendants’ post-market conference call with investors the same day, Rekor’s stock price fell an additional $2.45 per share, or 17.87%, to close at $11.26 per share on May 11, 2021representing a two-day total decline of $7.65 per share, or 40.45%. Then, on May 26, 2021, private investor Western Edge published a report addressing Rekor, entitled “Rekor Systems: Lackluster Growth Runway And Exaggerated Insurance Scheme Raise Substantial Downside Risk.” The Western Edge report alleged, among other things, that global competition was “miles ahead” of Rekor in ALPR development and market establishment; that the Company’s “realized results suggest management’s potential revenue guidance could be overstated by up to 80%”; and that investors were at risk of facing a “massive downside if [the Company’s] growth doesnt show up.” The Western Edge report also noted that Rekor’s predecessor in the Oklahoma UVED partnership had exited it because “the program is not economically feasible” given costs associated with the program and because “there was typically no consequences for individuals that simply ignored the fines/insurance requirements after they were identified.” Also on May 26, 2021, Mariner Research Group (“Mariner”) published a report addressing Rekor, entitled “REKR Government documents do not support investor expectations.” The Mariner report “highlight[ed] government documentation which shows that REKR’s revenue opportunities are likely a fraction of what investors expect[.]” Among other things, Mariner alleged that “Oklahoma government budgets imply that REKR’s much-vaunted UVED program is a sub $2MM revenue opportunityalmost 96% less than the >$40MM in revenue intimated by Rekors CEO.” The Mariner report likewise echoed the issues disclosed in the Western Edge report, including, inter alia, those that had caused Rekor’s predecessor in the Oklahoma UVED partnership to exit the program. Following the publication of the Western Edge and Mariner reports, Rekor’s stock price fell $0.44 per share, or 3.93%, to close at $10.77 per share on May 26, 2021.

Documents
Complaint