Eargo has been slammed in a criminal investigation and has withdrawn guidance
Following the news of a probe into insurance reimbursement claims, shares in the company lost half their value in after-hours trading on Wednesday.
After the bell on Wednesday, Eargo Inc. (EAR) announced that company is the subject of a criminal investigation by the US Department of Justice.
The probe is “related to insurance reimbursement claims the Company has submitted on behalf of its customers covered by federal employee health plans.” according to an SEC filing. On Tuesday, it was informed of the probe. Eargo stated that it is assisting the investigation.
Hearing aids are sold by Eargo, Inc. through internet retailers. The company’s items cost between $1,500 and $3,000. It goes to great lengths on the website to highlight that they “may be covered by federal insurance.” It also highlights its “Federal Employee program” on the website.
Eargo has withdrawn its financial guidance for the fiscal year ending Dec. 31 as a result of the probe.
Eargo increased its full-year net revenue projection to between $93 million and $96 million from an earlier range of $89 million to $93 million when it released its most recent earnings report on Aug. 12.
Eargo also stated that it is “been the subject of an ongoing claims audit by an insurance company that is the Company’s largest third-party payor. The Company has been informed by the insurance company that the DOJ is now the principal contact related to the subject matter of the audit.”
It also stated that it “ intends to work with the government with the objective of validating the process to support any future claims that the Company may submit for reimbursement.”
In after-hours trading, Eargo’s stock dropped $11.31, or 52 percent, to $10.36.