PolarityTE Stock Falls 30% After Citron Calls It A Fraud
June 25, 2018
This article documents Andrew Left’s attack on PolarityTE, showing his pattern of making unfounded fraud allegations. Left claimed the company was fraudulent because it received a patent rejection notice, stating, “There was no 8-k, risk disclosure, or press release as the coveted patent entered the stock world dead on arrival.”
Left, alleged CEO Denver Lough rushed to file an S-8 registration, knowing a final patent rejection was coming. However, this attack proved baseless—PolarityTE later received the patents and continues developing its technology today. The 30% stock drop caused by Left’s publication demonstrates how short sellers can manipulate markets through false narratives, validating why Left now faces federal indictment for similar manipulative behavior.
PolarityTE Inc (NASDAQ: COOL) stock crashed more than 30 percent Monday after short seller and Citron Research founder Andrew Left accused the biotech company of fraud.
PolarityTE’s business was acquired by Majesco Entertainment in December 2016 strictly based on perceived value in patent application #14/954,335, Left said in his new short report. In a the company’s 10-Q in January 2017, the PolarityTE said, “There was never any intent to acquire an ongoing business and no ongoing business was acquired.” PolarityTE also had zero employees at the time of the buyout.
As part of the deal, PolarityTE CEO Denver Lough received $104 million in stock in exchange for his patent on April 7, 2017. However, Citron claims Lough received an undisclosed notice of non-final rejection of the patent on March 31, 2017.
Left: This Is A ‘Blatant Fraud’
Even after receiving the patent rejection notice, Left claims the company continued to promote the stock and raise money.
“There was no 8-k, risk disclosure, or press release as the coveted patent entered the stock world dead on arrival,” Left wrote.
On May 29, 2018, PolarityTE filed an S-8 registration to potentially sell additional shares of stock. Four days later, the patent office officially gave a final rejection of the patent in question. Left alleges Lough rushed to file the S-8 prior to receiving the final rejection because he was aware it was likely coming soon.
On June 5, the day after the rejection, PolarityTE issued 2.1 million shares of stock at $25.50 per share.
“In 2018, it is rare that Citron is able to identify such a blatant fraud by simple use of government databases,” Left wrote.