Shares of Cogint, Inc. (NASDAQ:COGT) were down 18% as of 2:12 p.m. EDT Monday after short-selling firm Unemon Research asserted that company insiders are "facing multiple SEC and DOJ investigations."
Unemon claims in a 36-page report that "promoters of COGT [have been] indicted on criminal fraud/stock promotion charges" over the past few months. In addition, it states that Cogint chairman Michael Brauser is facing investigations "regarding multiple collapsed stock promotions." The report further predicts Cogint's stock will decline 80% to 90% before eventually being delisted.
To be fair, it remains to be seen whether any of this is true. And Cogint CEO Derek Dubner promptly responded this afternoon, insisting the short-seller's report "contains numerous, recycled and fabricated inaccuracies and misstatements, solely, we believe, to serve the writer's interest of making money from the stock's decline." Dubner elaborated:
It is unfortunate that small companies must endure this self-serving, unethical, and perhaps illegal conduct. As we have demonstrated for the last several quarters, our company is financially stronger, our business is solid, and we have built differentiated and valuable technology, massive databases, and products and solutions. The Company and its management have not received any communications from the SEC or from any state, local, or federal law enforcement agency or any other regulatory body regarding the allegations in the blog. We remain focused on serving our customers and creating shareholder value.
In the end, I tend to want to give Cogint the benefit of the doubt given both the sensationalistic tone of the short-seller's report and Dubner's flat-out denial of any contact from the SEC or other agencies regarding the allegations. However, these are serious claims, and it's no surprise to see Cogint shares falling as investors take a step back on the news.