SCWorx Corp. allegedly misled investors about a deal to provide 2 million rapid Covid-19 test kits, according to a would-be class complaint filed in New York federal district court.
The healthcare logistics solutions firm told investors it had received a committed purchase order for the kits, which help identify the disease caused by the coronavirus, the complaint filed Wednesday in the U.S. District court for the Southern District of New York said.
But SCWorx didn’t disclose that its purported test kit supplier “had previously misrepresented its operations,” the complaint said. The company also failed to divulge that its buyer was a small firm “unlikely to adequately support” 2 million additional orders per week as provisionally announced, the investors said.
SCWorx confirmed its plans to distribute the test kits in an April 17 press release.
The company’s share price rose by $9.77 on April 13, the day it announced the test kit orders, closing at $12.02. SCWorx’s share price fell $1.19—more than 17%—after a financial research firm cast doubt on its buyer and supplier April 17, closing at $5.76 on April 21, the complaint said.
The Securities and Exchange Commission temporarily suspended trading in SCWorx stock April 22 because of concerns the market lacked accurate information about its test kit deal. The suspension is set to expire May 5.
Causes of Action: Exchange Act §10(b)—Using a manipulative or deceptive device or contrivance for a securities transaction in violation of SEC rules (15 U.S.C. §78j); SEC Rule 10b-5—Employing a device, scheme, or artifice to defraud, making untrue statements or omitting facts, or engaging in any act, practice, or course of business which operates as a fraud or deceit (17 C.F.R. §240.10b-5).
Relief: Damages with interest; attorneys’ fees; court costs.
Potential Class Size: Hundreds or thousands who acquired SCWorx securities between April 13 and April 17.
Response: SCWorx didn’t immediately respond to a request for comment April 30.
Attorneys: Glancy Prongay & Murray LLP represents the investors.
The case is Yannes v. SCWorx Corp., S.D.N.Y., No. 20-cv-03349, complaint filed 4/29/20.