According to the Complaint, SCWorx Corp. 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 announced that it had received a committed purchase order of two million COVID-19 rapid testing kits, “with provision for additional weekly orders of 2 million units for 23 weeks, valued at $35M per week.”
On this news, the Company’s share price increased by $9.77, to close at $12.02 per share on April 13, 2020.
On April 17, 2020, Hindenburg Research issued a report doubting the validity of the deal, calling it “completely bogus.” On this 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. On April 22, 2020, the SEC halted trading of the Company’s stock.
The Complaint 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, the Complaint alleges Defendants failed to disclose to investors: (1) that SCWorx’s supplier for COVID-19 tests had previously misrepresented its operations; (2) that SCWorx’s buyer was a small company that was unlikely to adequately support the purported volume of orders for COVID-19 tests; (3) that, as a result, the Company’s purchase order for COVID-19 tests had been overstated or entirely fabricated; and (4) that, 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.
On September 17, 2020, the Court issued an Order consolidating cases and appointing Lead Plaintiff and Counsel. Lead Plaintiff filed a consolidated Complaint on October 19.