Eargo investors may receive additional information about the investigation by clicking the link "Submit Your Information" above. If you are a member of the class described below, you may no later than December 6, 2021 move the Court to serve as lead plaintiff of the class, if you so choose.
A class action lawsuit has been filed on behalf of those who purchased or acquired Eargo, Inc. (“Eargo”) (NASDAQ: EAR): (a) shares in or traceable to Eargo’s initial public offering of common stock conducted on or around October 15, 2020 (the “Offering”); and/or (b) common stock between October 15, 2020 and September 22, 2021, inclusive (the “Class Period”).
Eargo is a medical device company that manufactures and sells hearing aids directly to consumers with mild to moderate hearing loss. Coverage of Eargo’s products by third-party payors (i.e., insurance companies) and reimbursement that such payors provide Eargo for its products are critically important to Eargo’s revenue growth.
The Class Period commences on October 15, 2020, when the U.S. Securities and Exchange Commission (“SEC”) declared Eargo’s Registration Statement for the Offering effective. On or around October 15, 2020, Eargo conducted the Offering pursuant to a registration statement that Eargo filed with the SEC on September 25, 2020, and which, after three amendments, was declared effective by the SEC on October 15, 2020 (the “Registration Statement”). On October 19, 2020, Eargo filed a prospectus for the Offering with the SEC on a Form 424B4, which formed part of the Registration Statement (collectively, the “Offering Materials”). By means of the Offering Materials, Eargo offered and sold more than 9 million shares of common stock at $18.00 per share, resulting in over $162.5 million in gross proceeds for Eargo. The complaint alleges that in the Offering Materials and throughout the Class Period, Eargo made numerous materially false and misleading representations concerning the extent of available insurance coverage for Eargo’s products and how that coverage purportedly drove Eargo’s earnings and growth.
The truth began to emerge on August 12, 2021, after the market closed, when Eargo disclosed that an insurance company that is Eargo’s “largest third-party payor, who accounted for approximately 80% of [Eargo’s] gross accounts receivable as of June 30, 2021,” was conducting a claims audit and had not paid Eargo on any claims since March 1, 2021. Following this news, Eargo’s stock price declined by $8.00 per share, or over 24%, from $32.70 per share to $24.70 per share.
Then, on September 22, 2021, after the market closed, Eargo revealed that it “is the target of a criminal investigation by the U.S. Department of Justice . . . related to insurance reimbursement claims [Eargo] has submitted on behalf of its customers covered by federal employee health plans.” As a result of the criminal investigation of the company, Eargo withdrew its financial guidance for the fiscal year ending December 31, 2021. Following this news, Eargo’s stock price declined by an additional $14.81 per share, or over 68%, from $21.67 per share to $6.86 per share, representing a nearly 62% decline from Eargo’s Offering price of $18.00 per share.
The complaint alleges that in the Offering Documents, and throughout the Class Period, the defendants made false and/or misleading statements and/or failed to disclose that: (1) Eargo’s insurance customers were not a sustainable driver of Eargo’s financial results because insurers would not cover claims for Eargo’s products at the level Eargo represented to investors; (2) a substantial portion of insurance claims that Eargo submitted to its largest third-party payor were improper and were reasonably likely to lead to regulatory scrutiny and negatively impact Eargo’s financial results; and (3) as a result, the positive statements made by the defendants about Eargo’s business, operations, and prospects, including its 2021 financial guidance, were materially misleading and/or lacked a reasonable basis.
If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP: James Maro, Esq. (484) 270-1453; toll-free at (844) 887-9500; or via e-mail at info@ktmc.com. If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.