Judge Dismisses Class Action Alleging Misleading Conduct by Iris Energy During IPO

Iris Energy, a Bitcoin mining company, launched its initial public offering (IPO) in late 2021, successfully raising $232 million. However, shortly thereafter, its stock value experienced a steeper decline, following trends in the broader cryptocurrency market.

A recent ruling by a United States District Court judge has put an end to a class-action lawsuit that claimed Iris Energy misled investors during its IPO process. The case was centered around allegations that the company concealed important risks associated with its operations and provided misleading information to investors.

Details of the Ruling

On September 27, a ruling by Judge Jamel Semper resulted in the dismissal of the lawsuit without prejudice. The judge determined that the investors did not provide sufficient evidence to show that Iris Energy had knowingly made false statements or misled the investing public.

The lawsuit involved claims against Iris Energy, its executive team, and underwriting firms such as J.P. Morgan and Citigroup Global Markets. The plaintiffs argued that the company violated the Securities Act and the Securities Exchange Act during its 2021 IPO.

Allegations Presented

Key points raised by the plaintiffs included:

• Inaccuracies in the IPO documentation related to Iris Energy’s operations.
• Claims of undisclosed risks associated with loans taken out for mining equipment.
• Allegations of false and misleading statements regarding the company’s financial status, including profit and loss figures.

Despite these claims, Judge Semper concluded that Iris Energy had no obligation to disclose all specifics regarding its loan agreements and ruled that the plaintiffs failed to establish that the company’s disclosures were materially misleading.

Stock Performance and Market Context

Iris Energy went public on November 17, 2021, with a share price set at $28. Shortly after, the shares plummeted, reflecting a significant downturn in the cryptocurrency market. By January 24, 2022, the company’s share price had decreased by 69%, paralleled by a decline of over 36% in the price of Bitcoin during that same period.

Further Implications

On September 30, a statement released by Davis Polk, the legal representation for Iris Energy and its executives, noted that the lawsuit stemmed from plaintiffs seeking restitution for losses during a significant market decline in Bitcoin values throughout 2022.

In addition to the class-action lawsuit, Iris Energy has also faced scrutiny from short-selling firm Culper Research, which has labeled the company as “wildly overvalued” and criticized its level of investment in high-performance computing (HPC) relative to its ambitions in the sector.

Culper Research has publicly disclosed its short position on Iris Energy, asserting that the company’s commitments do not align with the projected investments necessary to maintain competitiveness in the HPC industry.