NET Power's Legal Storm: Assessing the Risks and Rewards Amid a Securities Fraud Lawsuit

The legal battle engulfing NET Power Inc. (NPWR) has sent shockwaves through the clean energy sector, raising critical questions about the company’s prospects and the risks facing its investors. At the heart of the controversy is Luciani v. NET Power Inc., a securities fraud lawsuit filed in the U.S. District Court for the Middle District of North Carolina (Case No. 25-cv-00296), which alleges that the company misled investors about its flagship Project Permian—a utility-scale clean energy plant in Texas’s Permian Basin. This article evaluates the legal risks, financial implications, and whether the stock’s current price reflects its true value or an opportunity for contrarian investors.

The Allegations: A Pattern of Misleading Claims

The lawsuit, filed on behalf of investors who purchased NPWR shares between June 9, 2023, and March 7, 2025, centers on false or misleading statements about Project Permian’s timeline, costs, and viability. Key claims include:

1. Delayed Timelines:
2. NPWR initially promised the plant would be operational by 2026. By November 2023, it admitted delays, pushing the target to late 2027 or early 2028. By March 2025, the timeline was pushed to no earlier than 2029—a full three years beyond the original projection.

3. These delays triggered stock price collapses, including an 18.54% drop in November 2023 and a 31.46% plunge in March 2025 (see below).

4. Cost Overruns:

5. The project’s budget was initially estimated at $950 million in 2023, then revised to $1.1 billion in 2024. By March 2025, the cost had ballooned to $1.7–2.0 billion, driven by supply chain issues and site-specific challenges in the Permian Basin.

6. Leadership Exodus:

7. In April 2025, the departure of the COO and CFO further rattled investors, causing another 5.75% decline in the stock.

The lawsuit argues that these misstatements artificially inflated NPWR’s stock during the Class Period, violating Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Investors who sold after the truth emerged now seek damages for their losses.

The Financial Implications: A Struggling Balance Sheet

NPWR’s financial health has deteriorated alongside Project Permian’s setbacks. By the end of 2024, its cash reserves had dropped from $580 million to $533 million, primarily due to escalating operational costs. With the project’s total cost now exceeding $2 billion, the company faces a critical question: Can it secure additional funding to complete Project Permian, or will it default on obligations?

The lawsuit’s success could further strain NPWR’s finances by forcing it to pay damages or settle. According to plaintiffs’ lawyers—including Pomerantz LLP and Robbins Geller—the case could hinge on whether NPWR’s executives knew about the project’s risks but chose to conceal them.

Legal Risks: A High-Stakes Battle

Investors must weigh two critical risks:

1. Lawsuit Outcome:

2. If the plaintiffs prevail, NPWR’s leadership could be held personally liable, and the company might face significant financial penalties. Even a settlement could drain its already strained cash reserves.

3. Project Permian’s Viability:

4. The lawsuit underscores that Project Permian is NPWR’s only revenue source. If the project is delayed further or abandoned, the company’s valuation could collapse entirely.

The Investment Case: Is NPWR a Buy-or-Run?

While NPWR’s stock has plummeted to $2.13 (as of April 16, 2025), the question remains: Is this a distressed opportunity or a trap for unwary investors?

• Bull Case:

• Project Permian, if completed, could revolutionize clean energy by demonstrating a scalable, carbon-capture power plant. The technology’s potential might justify a long-term bet, assuming the company can secure financing and navigate the lawsuit.

• Bear Case:

• The lawsuit’s allegations of systemic mismanagement and the project’s prolonged delays suggest a high risk of failure. With leadership turnover and dwindling cash, NPWR’s survival hinges on factors outside its control.

Action Steps for Investors

1. Avoid New Positions:

2. The legal and operational risks outweigh the potential rewards for most investors.

3. Existing Holders Should Reassess:

4. If you own NPWR, consider exiting unless you can afford to lose your entire investment.

5. Monitor the Lead Plaintiff Deadline:

6. Investors who bought during the Class Period (June 9, 2023–March 7, 2025) have until June 17, 2025, to join the lawsuit or seek lead plaintiff status.

Final Take: Proceed With Extreme Caution

NPWR’s situation is a cautionary tale about overpromising in the clean energy sector. While the company’s technology has merit, its legal and financial challenges are existential. Unless you’re a risk-tolerant investor willing to bet on a turnaround against steep odds, now is not the time to invest. For most, the risks here far exceed the potential rewards.

Stay informed, and act swiftly if you hold NPWR shares.