Navigating the Storm: NET Power's Lawsuit and the Path Forward for Investors

Victor HaleFriday, Jun 6, 2025 6:05 am ET
32min read

The securities lawsuit filed against NET Power, Inc. (NYSE: NPWR) has thrown its flagship Project Permian into the spotlight, raising critical questions about the company's transparency, financial viability, and the risks facing shareholders. With a June 17 deadline looming for investors to join the class action, the case underscores the delicate balance between innovation in clean energy and the perils of overpromising. Let's dissect the allegations, assess the risks, and explore whether NPWR's stock presents an opportunity—or a trap—for investors.

The Lawsuit: A Case of Overpromising?

The lawsuit, captioned Luciani v. NET Power Inc., alleges that the company misled investors between June 2023 and March 2025 by downplaying the risks and delays plaguing Project Permian, its $1.7–$2.0 billion utility-scale plant in Texas. Key claims include:
- Unrealistic Timelines: The project's completion date was pushed from 2026 to 2029, with delays attributed to supply chain issues and site-specific challenges.
- Cost Blowouts: Initial estimates of $1.1 billion ballooned by ~80%, eroding investor confidence and triggering a 31% stock drop in March 2025.
- Silence on Risks: Executives allegedly omitted material risks, such as regulatory hurdles and leadership turnover (e.g., the April 2025 exit of the COO and CFO), which further rattled the stock.

The complaint cites Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, framing these missteps as securities fraud. While NET Power has yet to formally contest the claims, its public statements since 2023 have emphasized ongoing cost-reduction efforts and liquidity—yet investors remain skeptical.

Project Permian's Challenges: A Litmus Test for Innovation

Project Permian is central to NET Power's mission: demonstrating its proprietary Allam Cycle technology, which promises zero-emission power generation. However, its delays and cost overruns have exposed the risks of scaling novel energy solutions.

  • Operational Hurdles: Supply chain disruptions and site-specific issues (e.g., Texas's regulatory environment) have slowed progress. While the company touts modular design studies to lower future costs, these are still in early stages.
  • Liquidity Cushion: With over $500 million in cash as of Q1 2025, NET Power claims it can fund testing and development. Yet, its burn rate and the need for external financing loom large.

The project's success hinges on proving the Allam Cycle's commercial viability. If it succeeds, NPWR could become a leader in carbon-neutral power. If it falters further, the stock's recent lows (below $2.13 in April 2025) may be the start of deeper declines.

Financial Impact: A Stock in Crisis

The lawsuit's timing coincides with a 56% drop in NPWR's stock since its 2024 peak of $35. The shares now trade near multi-year lows, reflecting investor disillusionment. Key concerns:
- Valuation: With no revenue and significant R&D spending, traditional metrics like P/E are irrelevant. However, the stock's current valuation may already price in worst-case scenarios.
- Settlement Risk: If the lawsuit proceeds, a settlement could cost shareholders (via dilution or reduced payouts). Conversely, a dismissal might spark a rebound.

Legal and Strategic Considerations for Investors

The June 17 deadline to seek lead plaintiff status is a pivotal moment. Investors holding NPWR shares during the Class Period (June 9, 2023–March 7, 2025) should act swiftly:
- Participate in the Lawsuit: Law firms like Levi & Korsinsky, LLP (with a 20+ year track record of recoveries) operate on contingency, meaning no upfront costs. Joining could secure a share of any settlement.
- Monitor Project Updates: Watch for Q2 2025 progress on Phase 1 testing at La Porte and cost-saving initiatives. Positive news could stabilize the stock.
- Rebalance Portfolios: For long-term holders, the stock's depressed valuation may offer a speculative opportunity—if Project Permian delivers breakthroughs.

Conclusion: Weigh the Odds, Act with Precision

NET Power's lawsuit is a microcosm of the risks in clean energy innovation: groundbreaking tech often comes with execution hurdles. While the Allam Cycle's potential is undeniable, the company's ability to manage costs and timelines will determine its fate.

Recommendations:
1. Act Before June 17: File for lead plaintiff status to participate in potential recoveries.
2. Do Not Assume a Free Pass: Even if the lawsuit is dismissed, Project Permian's challenges remain.
3. Consider the Long Game: If NPWR can stabilize Project Permian and secure partnerships, the stock could rebound—especially as global demand for carbon-neutral energy surges.

The road ahead is fraught with uncertainty, but for investors willing to engage legally and monitor developments closely, NPWR's turmoil may present an asymmetric opportunity.

Final Note: Consult a financial advisor before making investment decisions. The June 17 deadline is non-negotiable—act promptly.