What happened

Shares of radio-frequency identification specialist IMPINJ (NASDAQ:PI) fell as much as 17.2% on Friday morning. Investors shrugged off a strong preliminary revenue report to focus on the company's announcement of an internal investigation that will push back the full earnings report until further notice. As of 11 a.m. EDT, Impinj's shares had recovered to a smaller 11.3% decline.

Blue banner reading RFID, Radio Frequency Identification.

Image source: Getty Images.

So what

In an early-morning press release, Impinj sketched out second-quarter revenue of approximately $28.5 million, above the high end of management's guidance range and also higher than the current Street view, which calls for $26.8 million. The company also reduced its bloated inventory balance by $1.4 million, presumably landing near $53.3 million when the full financial details become available.

CEO Chris Diorio noted that sales are coming back strong for both RFID endpoint and signal-reading systems.

"We expect to outperform our guidance on revenue, EPS, adjusted EBITDA, and inventory," Diorio said in a prepared statement. "Our backlog is growing, and we continue to believe the first half of 2018 was the turning point for our business."

At the same time, Impinj said that a complaint filed by a former employee has sparked an internal investigation into the company's business practices, led by the board's audit committee and managed by an external legal firm. This process put a stop to Monday's planned second-quarter report.

"Impinj cannot predict the duration or outcome of the investigation, and will not be in a position to file Form 10-Q until the Audit Committee completes its investigation," the company stated.

Now what

There's no word on exactly what Impinj's audit committee is looking into here, but an investigation with the heft to stop the company's financial reporting could result in restatements to older financial filings.

It's good to see Impinj starting to make its way back from the oversupply situation that reared its ugly head in 2017, but the negative market reaction makes sense here. If you can't trust Impinj's financial data, it's hard to make a case for owning the stock. The sooner this investigation is completed, the better -- even if the final findings don't come out smelling like wine and roses.