What happened

Shares of medical device maker ShockWave Medical (NASDAQ:SWAV) plummeted 28.5% in September, according to data from S&P Global Market Intelligence. By contrast, the S&P 500 returned 1.9% last month. 

The stock has taken investors on a roller-coaster ride since its debut on the Nasdaq in March at $17 per share. After opening at $24.80 on the day of the initial public offering (IPO), it went on to reach an all-time closing high of $66.02 on June 10. It's since rather steadily drifted lower, closing at $30.15 per share on Wednesday, Oct. 9.

The Silicon Valley-based company describes itself as a pioneer in the development and commercialization of devices that use intravascular lithotripsy (IVL) -- a tech based on sonic pressure waves -- to treat cardiovascular disease. 

ShockWave's Intravascular Lithotripsy (IVL) device, which looks like a rectangular gadget with a wand attached.

Image source: ShockWave Medical.

So what

We can attribute ShockWave stock's poor performance last month to a couple of catalysts, the first of which is company-specific. On Sept. 3, shares fell 11.8% following the release of a short-seller report that day. Cliffside Research "called the stock a strong sell and set a short-term price target of $23," as my colleague Brian Feroldi wrote at the time. "That was well below Friday's closing price of $41.85. [The market was closed on Monday, Sept. 2, for the Labor Day holiday.] Cliffside asserts that a seasonably weak third quarter will combine with a lockup expiration to drive the company's share price lower." The 180-day lockup period expired on Sept. 3, meaning insiders are now allowed to sell shares of the stock.

ShockWave stock's September decline was likely also in part due to overall market dynamics. Many highly valued growth stocks, particularly of companies that aren't profitable, were notably down last month. We can probably attribute this to concerns about a coming recession spurring some investors to lighten up on these types of stocks and park more of their money into investments that they deem less volatile. 

SWAV Chart

Data by YCharts.

Now what

Investors shouldn't have long to wait for material news. While the company hasn't set a date for the release of its third-quarter results, it should be sometime in early November.

As with most highly valued growth stocks that aren't yet profitable, investors should expect ShockWave stock to be volatile. But don't lose sight of the forest for the trees. The drop in September appears to be largely driven by short-term factors, such as concerns about the company's third-quarter results and insiders now being able to sell their shares. The intermediate-term direction of the stock, however, should highly depend upon whether the company receives approval by the Food and Drug Administration (FDA) to sell its C2 Coronary IVL device in the United States. The device, targeted at coronary artery disease, is currently marketed in Europe. ShockWave expects an FDA decision in the first half of 2021.