On August 12, 2021, after the market closed, Eargo revealed that claims submitted to the Company’s largest third-party payor, which accounted for 80% of Eargo’s accounts receivable, had not been paid since March 1, 2021. On this news, the Company’s share price fell $8.00, or over 24%, to close at $24.70 per share on August 13, 2021, on unusually heavy trading volume. 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 (the ‘DOJ’) related to insurance reimbursement claims the Company has submitted on behalf of customers covered by federal employee health plans.” Moreover, the DOJ is the “principal contact related to the subject matter of the [ongoing] audit” of Eargo by an insurance company that is the Company’s largest third-party payor. As a result of the foregoing, Eargo withdrew its full year financial guidance. On this news, the Company’s share price fell $14.81, or over 68%, to close at $6.86 per share on September 23, 2021, on unusually heavy trading volume. The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that Eargo had improperly sought reimbursements from certain third-party payors; (2) that the foregoing was reasonably likely to lead to regulatory scrutiny; (3) that, as a result and because the reimbursements at issue involved the Company’s largest third-party payor, Eargo’s financial results would be adversely impacted; and (4) as a result, Defendants’ statements about its business, operations, and prospects were materially false and misleading and/or lacked reasonable basis at all relevant times.
The alleged class includes : All persons and entities that purchased or otherwise acquired Eargo securities between February 25, 2021 and September 22, 2021, inclusive.
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