Root Inc. and some of its executives are facing a class-action lawsuit alleging that the "negligently prepared" offering documents for the company's IPO downplayed the true scope and severity of its cash flow.

The lawsuit alleges that several of Root's established industry peers had significant competitive advantages over the company with regard to telematics data and data engagement, despite the company's repeated touting of its "innovative" insurance business and "massive competitive advantage" that purportedly ensured its "disproportionate" market share.

The defendants also allegedly did not disclose that the company would foreseeably fail to generate positive cash flow for at least several years following its IPO and that it would require significant cash infusions to meet its cash flow needs.

The lawsuit was filed in the U.S. District Court for the Southern District of Ohio individually and on behalf of Root security holders who purchased the company's securities between October 2020 and March or bought class A common shares through Root's IPO in October 2020.

Root did not respond immediately to S&P Global Market Intelligence's request for comment outside of U.S. business hours.