Rangan Bandyopadhyay has filed a lawsuit against Rent the Runway, Inc. and its leadership, alleging misconduct related to misleading statements during the company's initial public offering (IPO) in October 2021. Filed on October 18, 2024, in the United States District Court for the Eastern District of New York, this shareholder derivative complaint accuses CEO Jennifer Y. Hyman and other executives of breaching fiduciary duties and violating federal securities laws.
Bandyopadhyay claims that Rent the Runway company executives misled investors about the financial health and operational challenges facing the company at the time of its IPO. The complaint details how Rent the Runway's leadership allegedly painted an overly optimistic picture of its recovery from COVID-19 impacts while omitting critical information about rising shipping costs and increased theft rates that were undermining profitability. According to Bandyopadhyay, these omissions violated federal securities laws and constituted a breach of fiduciary duty by failing to act in the best interests of shareholders.
Rent the Runway, known for pioneering online clothing rentals with its "Closet in the Cloud" concept, suffered significant setbacks during the pandemic as demand plummeted with event cancellations. The plaintiff argues that despite this downturn, executives falsely assured investors of strong momentum post-pandemic. However, issues such as unsustainable shipping costs—exacerbated by switching between UPS and FedEx—and increased product theft through drop boxes were not disclosed adequately in IPO documents.
The complaint highlights specific misleading statements made by Hyman in IPO-related documents claiming minimal impact from ongoing pandemic challenges. These statements are contrasted with internal realities where fulfillment costs soared due to logistical inefficiencies and thefts increased significantly due to new return methods. The filing also notes that Rent the Runway's stock price dropped dramatically post-IPO—from $21 per share to $1.58—further evidence of investor misguidance.
Bandyopadhyay seeks various forms of relief from the court including damages for losses incurred due to these alleged breaches and violations. The lawsuit demands accountability from those responsible within Rent the Runway’s leadership structure who participated in or allowed these misrepresentations.
Representing Bandyopadhyay is The Rosen Law Firm, P.A., with attorneys Phillip Kim and Laurence M. Rosen leading legal proceedings against defendants including prominent figures like Gwyneth Paltrow among others involved with Rent The Runway’s board or executive team at relevant times.