UM booster John Ruiz’s company LifeWallet admits ‘substantial doubt’ about its future

University of Miami booster John H. Ruiz’s insurance claims company LifeWallet told investors Wednesday that there is “substantial doubt” about its ability to continue operating.

The admission came as the company reported that it had brought in just over $300,000 in revenue between March and June from its primary business of collecting reimbursement for wrongly paid insurance claims.

That’s the least amount of revenue the company has reported in a quarter since it first went public in May 2022, then known as MSP Recovery.

The company reported a net loss of more than $211 million, a little more than its net loss in the same time period last year.

In response to questions about the quarterly report, LifeWallet referred the Miami Herald to the filing.

Veteran litigator Richard Hong said the company’s admission showed that it is in a “precarious state.” He lauded the company for acknowledging that there are concerns about its ability to continue as a going concern and said he anticipates that more information will be coming soon.

“It’s only a matter of time before the company’s accountants issue a going concern letter, which specifies all the company’s financial troubles,” said Hong, who worked more than 25 years for the U.S. Attorney’s Office in Miami and the U.S. Department of Justice in Washington, D.C., as well as the U.S. Securities and Exchange Commission

While it isn’t uncommon for newly public companies to report little revenue as they develop a new technology or product, Jay Ritter, a business professor at the University of Florida, said that companies with LifeWallet’s combination of modest income and massive losses don’t tend to fare well.

“Usually the prospects aren’t good,” he said.

The company also disclosed that it had been subpoenaed last month by the Justice Department as part of an ongoing investigation.

The company previously revealed that it is being investigated by the DOJ over its marketing to investors, the sharp drop in its stock price after it went public two years ago and the company’s proprietary algorithms and software, which it has said allows it to comb through insurance claims data to identify instances when an insurer paid a claim that it shouldn’t have.

The new subpoena was connected to one of the company’s recent press releases. The filing didn’t say which press release triggered the subpoena, and the company didn’t say when asked by the Herald.

One press release issued the month before the subpoena touted the “pivotal role” the company’s “sophisticated data analytics system” had played in helping the company clear an important legal hurdle in a class action lawsuit it has brought against USAA Property and Casualty Insurance Company.

Ruiz’s company is also being investigated by the SEC over similar matters. The Herald first reported the existence of the investigations last year, before the company publicly disclosed them.

Ruiz was dubbed “Miami’s NIL King” by ESPN in 2022 after his company paid millions of dollars to student athletes at the University of Miami in newly legal endorsements known as name, image and likeness — or NIL — deals. But his company’s endorsements have slowed as its financial and legal woes have mounted.

Ruiz also promised to build a new stadium for the University of Miami’s football team, which hasn’t materialized.

Ruiz, a brash attorney, spent lavishly ahead of his company’s public launch in 2022, purchasing several waterfront mansions and private jets.

His company went public through a merger with a special purpose acquisition company, or SPAC, and was initially valued at $32.6 billion, on the strength of what it said were hundreds of billions of dollars worth of wrongly paid insurance claims that it had acquired the right to collect.

That briefly put Ruiz on the Forbes list of billionaires.

LifeWallet was part of a wave of companies that went public through SPAC mergers, which require less regulatory oversight than traditional initial public offerings.

Ritter, the University of Florida professor, said few of these companies have been good investments since going public.

“The track record for SPAC mergers has just been abysmal,” he said.

Ruiz’s company was one of three South Florida companies that went public in the past five years by merging with an SPAC created by Miami investment firm Lionheart Capital. None have fared well since. That includes South Florida burger chain Burger Fi, which is currently trading at roughly 40 cents per share.

NASDAQ warning

Ruiz’s LifeWallet has fallen far short of its initial revenue projections in its first two years as a publicly traded company.

Even as the company announced more legal victories in recent months, they haven’t translated into significant earnings.

LifeWallet’s anemic revenue in the latest filing includes the proceeds from two settlements the company had touted earlier this year, including one with 28 property and casualty insurers and another with an unspecified number of property and casualty insurers.

Last year, the company took in $7.7 million in total revenue for the year, vastly less than the $963 million in net revenue it had projected.

The company has borrowed money from a number of lenders and restructured some of those deals to give itself more cash and more time to repay what it owes, but the company still said that it might not have enough money to exist beyond the next year if it fails to raise more capital.

The company also indicated in the filing that it was notified by NASDAQ in June that it faced being delisted from the stock exchange because its stock price had been below $1 for 30 straight days. The stock is currently trading at roughly 30 cents. The company has until Dec. 4 to regain compliance, which would require the stock to trade above $1 for at least 10 consecutive days.

Last year the company also faced potential delisting over its stock price but was able avoid being dropped from the exchange after executing a reverse stock split in which it combined existing shares into fewer, more valuable new shares that exceeded the $1 minimum.