Covid-Test Maker Sued by Investor Over ‘100% Accurate’ Claim
(Bloomberg) -- A maker of Covid-19 tests was sued by an investor who accused the company of falsely claiming its tests were 100% accurate in order to juice its share price while officers and directors were exercising their stock options.
Co-Diagnostics Inc. was named in a securities-fraud suit filed Monday in federal court in Salt Lake City by Gelt Trading Ltd. Sandy, Utah-based Co-Diagnostics was among a number of small-cap diagnostic companies that saw their market value multiply earlier this year because of the importance of testing in combating the coronavirus.
Worth less than a dollar at the end of last year, shares in Co-Diagnostics soared as high as $29.72 based on the company’s representations of the accuracy of its tests and orders it received, according to the complaint.
“Unlike many securities fraud cases, the Co-Diagnostics fraud is blunt and simple to understand,” Gelt said in its lawsuit. “Co-Diagnostics, its chief technology officer, and its other officers and directors made unequivocal statements to the market that its Covid-19 tests were 100% accurate -- a staggering claim that appeared to set Co-Diagnostics apart from other competitors developing Covid-19 tests.”
Representatives of Co-Diagnostics didn’t immediately respond to an email seeking comment on the lawsuit.
Co-diagnostic’s share price fell last month after the U.S. Food and Drug Administration said no Covid-19 test is 100% accurate, according to the complaint. The company was trading at around $17.71 on Monday afternoon.
In February, Co-Diagnostics said it had received regulatory clearance to sell its tests in the European Union, making it the first company in the world to receive this clearance, according to the investor’s lawsuit. In April, the company said it had received emergency use authorization for its tests from the FDA, according to the complaint.
The case is Gelt Trading Ltd. v. Co-Diagnostics Inc., 20-CV-00368, U.S. Distict Court, District of Utah (Salt Lake City).
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