What happened
Shares of telehealth services provider LifeMD (LFMD -7.96%) are falling sharply on Monday and were down by 12.7% as of 1:49 p.m. EDT, after dropping by as much as 18.8% earlier in the day. These losses are a bit surprising: The company released better-than-expected preliminary first-quarter results this morning, so one might expect that its stock would be moving in the opposite direction. Perhaps we can attribute LifeMD's woes on the market today to a shareholder class action lawsuit against the company filed by Pennsylvania-based law firm Kaskela Law.
So what
Understanding the basis for Kaskela Law's class action lawsuit requires a bit of background information. On April 14, investigative research firm Culper Research made serious accusations against LifeMD in a short-seller report. Specifically, Culper Research alleged that LifeMD and its executives are engaged in fraudulent and criminal business activities.
Following the release of this report, shares of LifeMD dropped by almost 25% in one day. On April 17, Kaskela Law announced the filing of a class action lawsuit against LifeMD on behalf of "investors who have suffered an investment loss in excess of $100,000" following Culper Research's short-seller report. In an open letter posted on the company's website, LifeMD responded to -- and denied -- the allegations brought forth by Culper Research.
Now what
Despite the drama linked to Culper Research's short-seller report, LifeMD's business seems to be doing well. For the first quarter, the company expects revenue of $18.2 million, which is above the consensus analyst estimate of $17.01 million. This revenue figure would also represent year-over-year top-line growth of 323%. The healthcare company attributes this performance to strong retention and new patient acquisition.