REG upsizes stock offering to 5M shares on same day class action lawsuit filed

On the same day Renewable Energy Group Inc. announced the pricing of an underwritten public offering of 5 million shares of its common stock at $67 a share, which was upsized from 4.5 million shares, the law firm Pomerantz LLP announced that a class action lawsuit has been filed against the company and some of its officers.

The gross proceeds of the common stock shares being offered are expected to be $335 million, the net proceeds of which will be used for working capital and other corporate purposes, and may include repayment of existing indebtedness and funding of capital expenditures, such as the expansion of its Geismar, Louisiana, renewable diesel plant. REG says it may also use some of the net proceeds to finance potential strategic transactions.

The class action suit against REG was filed in the U.S. District Court for the Central District of California on behalf of those (other than the defendants) who purchased or acquired REG securities between May 3, 2018, and Feb. 25, 2021.

The complaint alleges that the defendants made materially false or misleading statements and failed to disclose material adverse facts about its business, operations, and prospects. Specifically, the complaint is based around the failure of REG’s diesel additive system in Seneca, Illinois, which caused REG to not be the proper claimant for some of the $1 per gallon biodiesel tax credit it received between Jan. 1, 2017, and Sept. 30, 2020. As a result, the plaintiffs allege REG’s revenue and net income were overstated for certain periods and that there was “a material weakness in the company’s internal control over financial reporting related to the purchase and use of the petroleum diesel gallons when blending with biodiesel.” With that, the lawsuit claims REG’s positive statements about the company’s business, operations and prospects were “materially misleading and/or lacked a reasonable basis.”

On Feb. 25, 2021, after the market closed, REG issued a press release announcing its Q4 and full year 2020 financial results in which it disclosed these findings about the improper claiming of the tax credit at that site during the nearly four-year period.

Pomerantz says following this news, REG’s share price fell $8.17, or 9.5 percent, over two consecutive trading sessions to close at $77.77 per share on Feb. 26, 2021, on “unusually heavy trading volume,” according to the law firm.

In a company statement on the lawsuit provided to Biobased Diesel Daily, REG said, “Renewable Energy Group believes this lawsuit is without merit and intends to vigorously defend against it. As this is a matter of ongoing litigation, we do not intend to comment further.”