Healthier Choices Management (OTCMKTS:HCMC) is a popular penny stock that has rocketed higher and generated a following on investing subreddits. However, the news is not looking too good for HCMC stock today, with shares down 25%. So what is causing the plunge? And what else do you need to know now?
To start, Healthier Choices is a Florida-based company that focuses on solutions that help individuals live healthier lives. These solutions include vitamins and supplements, health and beauty products, and an organic grocery store. However, HCMC stock also represents a vape and e-liquids business. For the company, these vaping products represent a healthier alternative to tobacco products. They also represent a key reason for the interest in the penny stock.
As InvestorPlace contributor William White reported in January 2021, HCMC stock is captivating investors because of an ongoing lawsuit. Back in November 2020, Healthier Choices filed a patent infringement lawsuit against Phillip Morris (NYSE:PM). At the heart of the lawsuit are allegations by Healthier Choices that the IQOS product from Phillip Morris violates its patent for an electronic pipe. The patent for Healthier Choices recognizes its pipe that employ a method of combusting a material for inhalation, using a pipe with a battery, an electronic module, combustible material reservoir and a heating element.
For many investors, the hope is that Phillip Morris and Healthier Choices will settle the lawsuit in a way that is favorable for the smaller company. However, a new filing in the case is causing HCMC to take a turn south…
What Is Causing HCMC Stock to Plunge?
Essentially, it looks like Phillip Morris is looking to wash its hands of the lawsuit, and not through a settlement. Yesterday, it filed a motion to dismiss the lawsuit with prejudice in the United States District Court for the northern district of the Georgia Atlantic division.
In that motion, Phillip Morris says that Healthier Choices Management does not have grounds for its patent infringement lawsuit. Outlining the nature of its patent for an electronic, combustion-inducing pipe, Phillip Morris says its IQOS device does not function in the same way. This calls to question the mechanism by which its IQOS heat-not-burn process works.
What does this mean for investors? The road ahead could be rocky. So much of the story for HCMC stock right now rests on the lawsuit. Keep a close eye on the proceedings and on how Healthier Choices responds. And most importantly, make sure to do your own research so you understand the risk and reward balance at play with this high-flying equity.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.