Shareholders of CardioNet Inc. are suing the mobile cardiac monitoring firm and two of its senior managers, alleging that they falsely inflated the company’s prospects ahead of a damaging reimbursement rate cut.
The lawsuits, filed in the U.S. District Court for Eastern Pennsylvania, accuse CardioNet, chairman, president and CEO Randy Thurman and CFO Martin Galvan of issuing too-aggressive earnings forecasts that sent the company’s stock soaring to artificially high levels.
Shares reached $19.60 May 19, according to court documents, after the company released its guidance for 2009 through 2011. But on June 30, CardioNet lowered its 2009 guidance and rescinded its forecast for 2010 and 2011 “based on lower-than-anticipated commercial reimbursement rates,” according to the documents.
That sent shares plunging more than 41 percent to $9.57 July 1, down from $16.32 on June 30.
Then came news that Pennsylvania’s Medicare carrier, Highmark Medicare Services, was slashing its reimbursement rate for Mobile Cardiac Outpatient Telemetry by 33 percent.
That prompted CardioNet to rescind its 2009 guidance and sent share prices down another 34 percent, from $8.83 to a $5.87 close July 13.
The class-action suits, which affect anyone who bought CardioNet stock between April 30 and July 10, ask for compensatory damages and interest and jury trials.