Investors listening intently to whispers out of Wall Street are waking up this morning to some surprising news from the Eargo (NASDAQ:EAR) camp. The hearing aid company is reportedly on the hook with the government regarding some of its business practices. The news is catalyzing huge losses for EAR stock this morning, and while EAR holders are concerned with their holdings and how to benefit from the investigation, others are buying in and anticipating a future rebound.
Eargo is a manufacturer of hearing aids, founded over 10 years ago. The company takes exception to the unwieldy beige hearing aids one thinks of when they think of the tech; this sort of stigmatized technology is not something it wants its customers to be associated with. Rather, they put emphasis on young consumers, and produce more streamlined, low-profile hearing aids.
The company has secured plenty of capital over the years through fundraises; last year, it debuted on Wall Street with a public offering in September. And now, just under a year after its initial Nasdaq Exchange listing, it is seeing some massive losses.
EAR Stock Rocked by Newly Announced DOJ Investigation
The losses today come from an announcement out of the company earlier in the week. Wednesday saw Eargo executives announce a probe into the company by the Department of Justice. According to the DOJ, some malpractice has taken place within Eargo. The probe reportedly focuses on insurance reimbursement claims the company has filed on behalf of customers with federal employee health plans.
Details around the investigation are quite fuzzy. Thus, investors must wait and see what bad practices are really going on. In the meantime, though, a number of law offices are rallying EAR stock shareholders to reach out as they target Eargo.
The news is precipitating huge losses for the stock going into this morning. Already, the stock is down 68.5%, with 30 million shares exchanging against a daily average of just over 500,000. Of course, most of this volume is taking place in the form of a selloff.
However, retail investors, never ones to let a fire sale pass them buy, think this is a great buying opportunity for EAR. Across Twitter, many retail traders are announcing their dip-buying and price consolidation by adding discounted shares to their existing holdings. These investors believe with its solid fundamentals, the company will be good for a rebound once it is clear with the DOJ.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.