Pension Fund Accuses Cold Storage REIT Of Misleading Shareholders Before 2024's Largest IPO
Michigan-based Lineage Inc. executed the largest initial public offering of 2024, fielding at least $4.4B as investors banked on continued heat in the cold storage market.
A new lawsuit alleges Lineage actively inflated those expectations, misleading shareholders.
The city of St. Clair Shores Police and Fire Retirement System last week filed a class-action lawsuit against the REIT and its IPO underwriters, JPMorgan Chase, Morgan Stanley, Wells Fargo and BofA Securities.
The pension fund for public employees in the municipality northeast of Detroit is seeking financial relief and a jury trial after Lineage’s stock value fell from $78 at the time of the IPO to a low of about $41 in the middle of last month.
The suit alleges Lineage failed to reveal its financial performance had been “temporarily inflated” by the pandemic-induced cold storage boom in the lead-up to the IPO.
“The Registration Statement contained material misrepresentations about Lineage’s business, historical financial results, and the industry trends purportedly facing the Company at the time of the IPO,” according to the motion attorney Thomas Michaud filed Friday on behalf of the plaintiff in the U.S. District Court for the Eastern District of Michigan.
Lineage’s income from operations grew 350% to $398M between fiscal year 2021 and FY 2023, according to the lawsuit.
Supply chain distress caused by the pandemic led to a sharp increase in demand for cold storage facilities, but the lawsuit says this trend and Lineage’s performance were already waning in the second half of 2023.
“Rather than disclose these facts, the Registration Statement portrayed Lineage’s more muted results for the first six months of 2024 as a return to normalized customer inventory levels,” the lawsuit says.
Lineage executives said that its growth would continue following this period of rationalization.
“We believe that if we can remain true to what has made us successful as a private company, we will be even more successful as a publicly traded one,” co-Executive Chairmen Adam Forste and Kevin Marchetti wrote in an IPO prospectus filed with the Securities and Exchange Commission.
But their company quickly started racking up losses.
The month after the IPO was filed in July 2024, Lineage revealed that it suffered an $80M net loss in the quarter prior to the IPO, a 67% quarter-over-quarter increase. Lineage then reported a $543M net loss in Q3 2024, when the IPO took place.
The company ultimately posted $1.3B in revenue in Q1 2025, a 2.7% year-over-year decrease.
“Lineage was in the midst of a sustained downturn, as the Company’s customers not only destocked excessive inventory built up during the COVID-19 pandemic, but also shifted to the maintenance of leaner inventories on a go-forward basis,” the lawsuit says.
Lineage, JPMorgan, Morgan Stanley, Wells Fargo and didn't respond to Bisnow’s requests for comment. BofA Securities declined to provide a statement.
U.S. District Judge Denise Page Hood issued a summons Monday giving the company 21 days to respond to the suit.
At least one other law firm, Robbins Geller Rudman & Dowd LLP, is looking for plaintiffs to sue Lineage. It said it is planning to file a class-action lawsuit no later than Sept. 30.
