The Post-IPO Peril: Assessing Long-Term Risks in Logistics REITs Amid Governance and Demand Uncertainties

The logistics real estate investment trust (REIT) sector has long been a magnet for investors seeking stable returns in a world of economic uncertainty. However, the recent collapse of Lineage, Inc. (NASDAQ: LINE)—the world's largest cold-storage REIT—has exposed a darker side of post-IPO investing. From its July 2024 IPO at $78 per share to its current price near $40, Lineage's stock has become a case study in securities fraud allegations, operational mismanagement, and the fragility of investor trust. For those considering long-term exposure to logistics REITs, the question is no longer whether such risks exist, but whether they are isolated to Lineage or indicative of a systemic flaw in the post-IPO ecosystem.

Lineage's Downfall: A Cautionary Tale

Lineage's troubles began with its $5.3 billion IPO, which positioned the company as a “recession-resistant” player in the cold-storage sector. The registration statement painted a picture of robust demand, technological superiority (via its LinOS automation system), and a business model insulated from macroeconomic headwinds. But the August 2025 securities fraud lawsuit filed by Robbins Geller Rudman & Dowd LLP and other firms alleges a different story: one of material misrepresentations and omissions.

Key allegations include:
- Weakening demand: Customers reduced inventory levels post-pandemic, leading to declining occupancy rates and revenue per pallet.
- Unsustainable pricing: Pre-IPO price hikes failed to offset softening demand, eroding margins.
- Operational inefficiencies: Despite claims of competitive advantages, Lineage's occupancy rates fell from 86% in 2023 to 83% in 2024, while storage revenue per pallet dropped 1.7%.
- Governance failures: Internal warnings about market shifts were allegedly ignored by the board, which prioritized optimistic projections over risk assessments.

The fallout was swift. By August 2025, Lineage's stock had lost 50% of its value, and a class-action lawsuit sought to hold executives, underwriters, and the IPO sponsor accountable. The company's 2024 GAAP net loss of $751 million and declining economic occupancy rates (from 87.2% to 83.9%) further underscored the disconnect between its public narrative and operational reality.

Are Lineage's Issues Isolated?

Lineage's case is not an outlier. The 2024–2025 period has seen a surge in securities class actions (SCAs) targeting post-IPO REITs, particularly in the logistics sector. For example, Innovative Industrial Properties, Inc. (IIPR), a cannabis-focused REIT, faced a similar lawsuit after its largest tenant defaulted and internal fraud was uncovered. These cases share common threads:
- Overvaluation hype: IPOs often rely on optimistic projections that obscure underlying operational weaknesses.
- Governance lapses: Boards and management teams may prioritize short-term gains over long-term sustainability.
- Short-seller influence: Reports from short-sellers increasingly serve as blueprints for plaintiffs, exposing misrepresentations in real time.

Christian Hartman of Arch Insurance noted at the 2025 Nareit conference that core SCAs rose by 4% in 2024 compared to the prior year, with market cap losses during class periods expanding significantly. This suggests a broader trend of post-IPO scrutiny, particularly in high-growth sectors where valuations outpace fundamentals.

The Bigger Picture: Logistics REITs in a Shifting Landscape

The cold-storage sector itself is undergoing transformation. Post-pandemic supply chains are leaner, e-commerce demand is volatile, and climate-related disruptions are reshaping logistics networks. For REITs like Lineage, these trends create both opportunities and vulnerabilities.

Consider the following:
- Demand volatility: While e-commerce growth drives long-term demand for cold storage, short-term fluctuations in inventory levels (e.g., post-pandemic destocking) can destabilize revenue.
- Operational complexity: Maintaining high occupancy rates in a competitive market requires continuous innovation, which Lineage's LinOS system failed to deliver.
- Regulatory and legal risks: As Lineage's case shows, governance failures can trigger lawsuits that erode investor confidence and liquidity.

Investment Implications and Advice

For investors, the Lineage saga underscores the need for rigorous due diligence in post-IPO plays. Here's how to approach the sector:
1. Scrutinize disclosures: Look for inconsistencies between management's narrative and operational metrics (e.g., occupancy rates, revenue per unit).
2. Assess governance: Evaluate board independence, risk management protocols, and alignment with long-term value creation.
3. Diversify exposure: Avoid overconcentration in high-growth REITs with unproven business models.
4. Monitor legal risks: Securities lawsuits can act as early warning signals for deeper governance flaws.

While Lineage's stock may rebound if it resolves its legal and operational challenges, the broader lesson is clear: post-IPO logistics REITs carry unique risks that require careful evaluation. Investors should balance optimism about sector growth with skepticism about management's ability to navigate a rapidly changing environment.

In the end, the cold-storage sector remains a critical part of the global supply chain. But as Lineage's story shows, the path to long-term returns is paved with both ice and fire.