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On September 17, 2020, Kaplan Fox’s client, Vy Nguyen, was appointed lead plaintiff and the Court approved his selection of Kaplan Fox as lead counsel. The Court also consolidated the three complaints filed against SCWorx Corp. and Marc S. Schessel, the Company’s Chief Executive Officer and Interim Chief Financial Officer at all relevant times (the “Defendants”).
According to the complaints, SCWorx provides data content and services related to the repair, normalization and interoperability of information for healthcare providers.
On April 13, 2020, before the market opened, SCWorx issued a press release announcing that it had received a committed purchase order for two million COVID-19 Rapid Testing Units from Rethink My Healthcare (“Rethink”), with provision for additional weekly orders of two million units for 23 weeks, valued at $35 million per week.
Following this news, SCWorx shares skyrocketed by $9.77 per share, over 400%, to close at $12.02 per share on April 13, 2020.
On April 17, 2020, Hindenburg Research issued a report questioning the validity of the deal, calling it “completely bogus,” based on Chief Executive Officer Marc Schessel’s checkered past, the questionable credibility of supplier Promedical, as well as difficulty believing that Rethink, which Hindenburg Research alleges to be a tiny, newly formed operation, would be able to come up with $35 million per week.
According to the complaints, following the April 17 news, the Company’s share price fell $1.19, or more than 17%, over three consecutive trading sessions to close at $5.76 per share on April 21, 2020, on unusually heavy trading volume.
The complaints allege that the Defendants failed to disclose to investors that: (i) SCWorx’s supplier for COVID-19 tests had previously misrepresented its operations; (ii) SCWorx’s buyer was a small company that was unlikely to adequately support the purported volume of orders for the COVID-19 tests; (iii) as a result, the Company’s purchase order for COVID-19 tests had been misstated, overstated, or entirely fabricated; and (iv) as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis.
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