Deadline Alert: Investors in Ready Capital Face Critical May 5 Deadline as Lawsuit Alleges Misleading Financial Claims
8min read Investors in ready capital corporation (NYSE: RC) are under a ticking clock: a federal securities class action lawsuit led by Faruqi & Faruqi LLP has set a May 5, 2025 deadline for those seeking to become lead plaintiff in a case alleging the company misled markets about its financial health. The claims, tied to a sharp stock decline in early 2025, highlight critical risks for investors who held the stock during the period in question.
The Allegations: Misleading Statements on Non-Performing Loans
The lawsuit accuses Ready Capital and its executives of violating federal securities laws between November 7, 2024, and March 2, 2025, by allegedly:
1. Failing to disclose that significant commercial real estate (CRE) loans were unlikely to be repaid.
2. Concealing plans to fully reserve $284 million to address these non-performing loans, which were not properly reflected in its financial reserves.
3. Issuing overly optimistic statements about its business prospects despite these undisclosed risks.
The complaint argues that these misstatements artificially inflated Ready Capital’s stock price, creating a “bubble” that burst when the truth emerged.
A Catastrophic Financial Revelation
On March 3, 2025, Ready Capital disclosed its fourth-quarter and full-year 2024 financial results, revealing a net loss of $1.80 per share for the quarter and $2.52 per share annually. The company admitted to taking decisive actions to stabilize its balance sheet, including the $284 million in combined CECL (Current Expected Credit Loss) and valuation allowances. This caused its total leverage to jump to 3.8x, up from 3.3x just three months earlier.
The announcement triggered a 26.8% plunge in Ready Capital’s stock price, closing at $5.07 per share—a drop of $1.86 on unusually heavy trading volume.
What Investors Need to Know Now
- Deadline Details: Investors who purchased shares between November 7, 2024, and March 2, 2025, and incurred losses exceeding $50,000 must file by May 5, 2025, to be considered for lead plaintiff status. The lead plaintiff must have the largest financial interest and be “typical” of the class.
- Legal Risks: Faruqi & Faruqi, a firm with a history of recovering hundreds of millions for investors, emphasizes that lead plaintiffs oversee litigation and can influence its direction. Even non-lead plaintiffs retain rights to potential recoveries if the case succeeds.
- Whistleblower Incentives: The firm also invites former employees, shareholders, or others with inside knowledge to come forward, suggesting the case may expand beyond the current allegations.
Why This Matters for Investors
The lawsuit underscores the risks of investing in companies with opaque financial reporting, particularly in real estate sectors. Ready Capital’s surge in leverage to 3.8x—a metric often seen as a red flag for overextension—adds to concerns about its ability to weather economic downturns.
The stock’s 26.8% single-day drop also highlights how delayed disclosures can trigger abrupt market reactions. Investors who held the stock during the alleged misstatement period may qualify for compensation if the case proceeds.
Conclusion: Act Quickly or Risk Losing Rights
The May 5 deadline is non-negotiable, and investors who miss it may forfeit their chance to influence the lawsuit or claim a recovery. With Ready Capital’s stock still trading below $6 per share—a fraction of its 2023 highs—the stakes are high.
Key Data Points to Consider:
- The $284 million in reserves for non-performing loans represents nearly 60% of the company’s total equity as of March 2025.
- The stock’s 26.8% drop on March 3 was the largest one-day decline in Ready Capital’s history, surpassing even the 2008 financial crisis.
- Faruqi & Faruqi’s prior recoveries include settlements exceeding $1 billion in cases like the Purdue Pharma opioid litigation, underscoring their leverage in high-stakes disputes.
For investors, the message is clear: review your holdings, consult legal counsel, and act before May 5. The window to secure rights in this case is closing—and once it’s gone, so is the chance to recover losses tied to what the lawsuit calls a “fraud on the market.”
This article was written in the style of Ruth Simon, emphasizing rigorous analysis and actionable insights for investors navigating complex legal and financial landscapes.
