Obalon Therapeutics, Inc.
- Company Name
- Obalon Therapeutics, Inc.
- Stock Symbol
- Class Period
- October 5, 2016 and January 23, 2018, including purchasers pursuant to the Company’s October 5, 2016 initial public offering
- Motion Deadline
- April 15, 2018
- Southern District of California
The complaint charges Obalon and certain of its officers with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933. Obalon is a medical device company that develops and commercializes medical devices to treat obese and overweight people by facilitating weight loss. The Company’s initial product offering is an FDA-approved intra-gastric balloon system that is swallowed and inflates to provide progressive and sustained weight loss in obese patients.
On September 9, 2016, Obalon filed a Registration Statement on Form F-1 with the SEC in connection with its initial public offering (“IPO”), which was declared effective on October 5, 2016. On October 6, 2016, Obalon filed the Prospectus for the IPO and sold 5 million shares of Obalon stock at $15 per share for net proceeds of approximately $67.2 million.
The complaint alleges that throughout the Class Period and in the Registration Statement for the IPO, defendants made materially false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and financial results. Specifically, the complaint alleges defendants failed to disclose that the Company had been recognizing revenue in violation of Generally Accepted Accounting Principles and that it lacked adequate internal controls over accounting and financial reporting.
Then on January 23, 2018, Obalon issued a press release disclosing that “a purported whistleblower contacted KPMG LLP, the Company’s independent auditors, to make certain allegations relating to allegedly improper revenue recognition during the Company’s fourth fiscal quarter of 2017.” The Company further stated that “Obalon’s Audit Committee will oversee an internal investigation of these allegations.” On this news, Obalon’s stock price fell $1.73 per share, or more than 33%, to close at $3.46 per share on January 23, 2018, representing a decline of nearly 77% from the IPO price of $15 per share.