On June 22, 2020, defendants conducted Progenity’s IPO, in which over 6.6 million shares of Progenity common stock were sold to the investing public at a price of $15 per share, which generated over $100 million in gross offering proceeds.
The complaint alleges that the IPO’s Registration Statement was negligently prepared and contained statements of material fact that were untrue as a result, omitted material facts that were necessary to make the statements contained therein not misleading, and failed to make the disclosures necessary as required under the rules and regulations governing its preparation. Specifically, this Registration Statement failed to disclose, inter alia, the following adverse facts that existed at the time of the IPO, rendering numerous statements provided therein materially false and misleading: (i) that Progenity had overbilled government payers by $10.3 million in 2019 and early 2020 and, thus, had materially overstated its cash flows, earnings, and revenues, from operations for the historical financial periods provided in its Registration Statement; (ii) that this overpayment would have to be refunded by Progenity in the second quarter of 2020 (the same quarter during which the IPO was conducted), which adversely impacted its quarterly results; and (iii) that during the second quarter of 2020 Progenity was suffering from accelerating negative trends with respect to Progenity’s product pricing, testing volumes, and revenues.
Shortly after the IPO was offered, Progenity’s stock suffered significant price declines. By August 14, 2020, Progenity stock closed at just $7.71 per share – nearly 50% below the $15 per share price investors paid for the stock in the IPO less than two months previously.
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