MiMedx Stockholder Lawsuits
On May 1, a 324-page amended complaint was filed in one of four class-action lawsuits we found through a Google search. The lawsuit first filed February 2, 2018 by the Carpenters Pension Fund of Illinois against MiMedix, Petit, three other company executives, and the company’s auditor Cherry Bekaert (Case No. 1:18-cv-00830-WMR, Northern District of Georgia) alleges many violations of federal securities laws in detail.
One of many alleged channel-stuffing incidents described in the shareholder lawsuit is a story about shipping unordered shoebox-sized packages of the company’s most expensive, infrequently used skin grafts, which cost $6,700 each. In the lawsuit, this activity was characterized as the “Limb Salvage Initiative”.
“Between March 22 and March 31, 2016, the Company sent 7×7 cm EpiFix grafts to 20 VA hospitals across the country, representing approximately $2 million to $2.4 million of excess product,” most of which was still on VA shelves but unpurchased as of November 2016, the lawsuit alleges.
“For years, the Company had been stuffing customer shelves with far more product than they could use. As of late 2017, MiMedx inventory dating back to 2013 still remained on VA shelves,” the lawsuit alleges. “MiMedx employees were physically running out of room at VAs to stuff additional products.”
Cornerstone Research, which keeps a database of stockholder class-action lawsuits, says that median class-action stockholder settlements nationwide equaled 6% of “simplified tiered damages”* in 2018, and have averaged 5.1% from 2009 on.
*A measure of potential shareholder losses based on the dollar value of a defendant’s stock price movements on specific dates” – Cornerstone.
From its peak to low, MiMedx stock lost more than $1.88 billion in value. However, the total loss for calculating damages would likely be less.
What’s Next?
There’s a lot of value in this firm and now, in addition to former CEO Pete Petit, a group of Wall Street vulture capitalists have descended to pick at MiMedx’s bones.
Can Pete force his way back in?
Are there more shoes to drop from the Department of Justice, SEC or other agencies?
Will investors ever get reliable financial statements?
How badly has MiMedx’s core business been affected by all of this drama?
Stay tuned, for sure.
