SALT LAKE CITY — PolarityTE, a biotech firm that's pioneered new processes for tissue regeneration, saw its stock price tumble Monday morning following news of a U.S. Securities and Exchange Commission probe involving the company.
While the company made no mention of SEC-related activities in a Monday press release about its annual filing with the agency, the document itself, known as a Form 10-K, noted the company was both under investigation and had received a records subpoena for three individuals with connections to PolarityTE.
The report notes that "On March 4, 2019, we obtained from the SEC a copy of the formal order of investigation of the company and its affiliates with respect to possible violations of the federal securities laws, including, among other things, the anti-fraud provisions of the Securities Act and the Exchange Act with respect to the company’s public disclosures, the beneficial ownership reporting provisions of the Exchange Act and the anti-price manipulation provisions of the Exchange Act."
PolarityTE wrote in the filing that it had also been served on March 1 with a "subpoena from the SEC requesting additional documents related to, among other things, communications and agreements between us and, among others, John Stetson, Barry Honig and Michael Brauser." The subpoena also targeted records from the company's acquisition in 2017 by Majesco Entertainment Co., communications with regulators regarding the company's lead product, SkinTE, as well as documents related to promotions of PolarityTE and its securities.
PolarityTE said Stetson was the company's former chief financial officer and chief investment officer, and Honig and Brauser each own 5 percent stakes in the company's stock. The three men were also among 10 people charged by the SEC in September 2018 for "participation in long-running fraudulent schemes that generated over $27 million from unlawful stock sales and caused significant harm to retail investors who were left holding virtually worthless stock."1 comment on this story
The SEC complaint alleges "a group of prolific South Florida-based microcap fraudsters led by Barry Honig manipulated the share price of the stock of three companies in classic pump-and-dump schemes." PolarityTE was not among those three companies.
The company said it intends to "fully cooperate with the SEC regarding their March 2019 subpoena and this ongoing investigation."
PolarityTE's stock dropped some 25 percent early Monday but closed the trading day down about 15 percent, at $13.05 per share.