Bull v. 22nd Century Group, Inc., et al 1:19-cv-00409-NGG-ST — On January 21, 2019, investors sued 22nd Century Group, Inc., (“22nd Century” or the “Company”) in United States District Court, Eastern District of New York. The XXII class action alleges that plaintiffs acquired 22nd Century stock at artificially inflated prices between February 18, 2016 and October 25, 2018 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time. For more about the XXII Lawsuit, please contact us today.
Summary of the Allegations
According to its website, the Company (NYSE:XXII) engages in “the research, development, licensing, manufacturing, and worldwide sales and distribution” of tobacco varying nicotine levels.
Specifically, the Company claims that it can produce tobacco “with up to 97% less nicotine than conventional tobacco – as well as plants with relatively high nicotine levels.”
The Company’s history dates to 1998, when Joseph Pandolfino founded it “to provide funding to North Carolina State University (NCSU) for a research and development collaboration on nicotine biosynthesis in the tobacco plant.”
In ensuing years, the Company developed its proprietary technology and continued its research with several partners. 22nd Century became a publicly traded company in 2011 and formed a partnership with British American Tobacco (“BAT”). However, 22nd Century’s partnership with BAT ended in 2017.
Summary of Facts
22nd Century and two of its senior officers (the “Individual Defendants”) now stand accused of deceiving investors by lying and withholding information about the Company’s business practices and prospects during the Class Period.
Specifically, they are accused of omitting truthful information about the susceptibility of its stock to certain types of manipulation from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused 22nd Century stock to trade at artificially inflated prices during the time in question.
The truth came out in a series of events that transpired on February 2, 2018 and October 25, 2018. In the first instance, a Seeking Alpha contributor, Fuzzy Panda Research, stated that the Company used a “years’ long ‘rampant paid stock promotion’ scheme to inflate 22nd Century’s share price.” The article also noted that “the sponsors of some of the articles from 2014 through 2017 were undisclosed.”
Then, on October 25, another Seeking Alpha published another article by the same contributor “suggested the SEC is actively investigating 22nd Century Group for its involvement in a potential pump and dump scheme.”
A closer look…
As alleged in the January 21 complaint, the Company and/or Individual Defendants repeatedly made false and misleading public statements during the Class Period.
For example, on a form filed with the SEC at the beginning of the Class Period, the Company stated that its “stock price was subject to volatility, but failed to disclose its stock could experience volatility due to manipulation.”
Another form filed with the SEC on March 8, 2017, also included certifications signed by the Individual Defendants in accordance with federal law “attesting to the accuracy of financial reporting, the disclosure of any material changes to the Company’s control over financial reporting and the disclosure of all fraud
Finally, on another form filed with the SEC on March 7, 2018, the Company reiterated that its “stock price was subject to volatility, but failed to disclose its stock could experience volatility due to manipulation.”
Impact of the Alleged Fraud on 22nd Century’s Stock Price and Market Capitalization
|Closing stock price prior to disclosures:
|Closing stock price the trading day after disclosures:
|One day stock price decrease (percentage) as a result of disclosures:
The following chart illustrates the stock price during the class period:
Actions You May Take
NOTE: You must file an application to be appointed lead plaintiff prior to this deadline in order to be considered by the Court. Typically, the plaintiff or plaintiffs with the largest losses are appointed lead plaintiff.
In order to identify your potential exposure to the alleged fraud during the time in question, you may wish to perform an analysis of your transactions in 22nd Century common stock using court approved loss calculation methods.
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