The company escaped penalty after winning dismissal of 2 lawsuits against Stereotaxis and its management. Both lawsuits were filed in the fall of 2011 after STXS shares dove nearly 60% in less than a week that August.
The 1st lawsuit, filed in October 2011, sued the company as well as CEO Michael Kaminski and former CFO Daniel Johnston for allegedly misleading investors about its market position. A derivative lawsuit filed in December 2011 also accused the board of directors and certain company officers of concealing important information to hide the company’s struggles.
Stereotaxis took a major Wall Street hit in August 2011 after suspending its full-year guidance on a particularly weak 2nd quarter, after which then-CFO Johnston resigned. The shareholder lawsuits claimed that Stereotaxis and its leadership had covered up softness company’s flagship Niobe catheter navigation systems, leading to the sudden stock collapse and exposing the company to federal securities violations.
The lawsuits claims that Stereotaxis "knew or recklessly disregarded" major problems with the devices while maintaining that the Niobe technology was "setting a new standard of care." The lawsuit claims that the company insisted that the Niobe system was on its way to broad clinical adoption despite customer demands for "fundamental product improvements" and investor concerns that the backlog would be a "significant indicator of future performance," according to court documents.
By April 2011 Stereotaxis pinned its hopes on the updated Niobe Epoch Solution, advising shareholders that "achieving our outlook for new capital orders and revenue growth will largely depend on the market acceptance of Epoch." When the company released its earnings report in August, leadership decided to suspend its financial guidance for the year, saying that it would begin providing guidance again when there was "more predictability" in its business.
U.S. District Judge Henry Edward Autrey ruled in March this year that the plaintiffs in the 1st lawsuit failed to make their case, awarding Stereotaxis its motion to dismiss. Since shareholders failed to file an appeal by mid-April, the lawsuit will remain closed. The derivative lawsuit was dismissed without prejudice by a joint motion from both parties, according to a Stereotaxis SEC filing.
STXS shares still haven’t recovered from that 2011 loss, when the stock went from a close of $32.45 on August 1 to a close of $14 on September 1. The stock has continued its long-term slide, and STXS shares were trading at $2.98 as of about 12:50 p.m. today, up 1.8% on the day but down 17.6% since the start of the year.