“The #1 Tech Opportunity of the Decade”

On February 8th, Luke Lango is making his biggest call of 2023. He’s recommending technology (that you’ve likely never heard of) that could help 122 million people… And mint up to $3 trillion in wealth.

Wed, February 8 at 8:00PM ET
 
 
 
 

Establishment Labs (ESTA) Stock Falls 12% on Hindenburg Short Report

  • Hindenburg believes that Establishment Labs’ (ESTA) breast implants may pose safety concerns for customers.
  • The company has also hired a shady advisor to help with its U.S. launch.
  • Shares of ESTA stock are down more than 25% year-to-date (YTD).
An image of medical icons in a web; DNA, bandage, eye, lungs, heart, syringe
Source: ArtemisDiana/Shutterstock

Establishment Labs (NASDAQ:ESTA) stock is plunging lower today after short seller Hindenburg Research released a short report on the company. Establishment operates in the breast augmentation business, designing and developing silicone breast implants. The company claims that its implants are safer than competitors due to “clinical data” and “unique surface technology.” Its best-selling product is its Motiva implants, which have received authorization in Europe, Latin America and some parts of Asia.

However, Hindenburg points out that Establishment has lost money every year since becoming publicly traded, bringing total deficits to $249.4 million. During the second quarter, it lost $37.1 million. This is up from a $5.3 million loss in the prior-year period.

Meanwhile, Establishment’s need for cash isn’t going anywhere. The company currently has cash on hand of $91.3 million and total debt of about $145.5 million charged at a 9% interest rate.

Despite this, supporters believe that Establishment will receive U.S. Food and Drug Administration (FDA) approval for Motiva in mid-to-late 2023. As such, they have awarded ESTA stock a price-sales (P/S) multiple of 9.5 times. The U.S. boasts the world’s largest breast implant market; per the report, it accounted for an estimated 22.9% of global sales in 2020.

Hindenburg Releases Short Report on ESTA Stock

Despite the enthusiasm of supporters, the timeline for Establishment to receive FDA approval may take longer than expected. Hindenburg notes that FDA regulations concerning implants have gotten more strict over the years. This is due to patients getting implant illness and forms of cancer after operations.

Furthermore, Hani Zeini — the advisor Establishment hired last month to assist with its U.S. launch — was sued by the U.S. Securities and Exchange Commission (SEC) in 2018. The agency stated that Zeini concealed damaging information about Sientra (NASDAQ:SIEN), another breast augmentation company, before the company announced a $61 million stock offering. As a result, Zeini has been banned from serving as an officer or director of a company for five years.

Through research, Hindenburg concluded that “almost all” of the safety studies concerning Establishment’s products had conflicts of interest as well. The lead surgeon on Establishment’s “only unconflicted paper” even said he stopped using its products due to “displacement and rotation.” Plastic surgeons from Argentina and Italy have questioned Establishment’s “expert consensus” recommendations for Motiva as well. In the past, customers have issued negative reviews and “multiple lawsuits” concerning the implants.

Hindenburg has disclosed that it is short shares of ESTA stock.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read More:Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Eddie Pan did not hold (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.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.


Article printed from InvestorPlace Media, https://investorplace.com/2022/10/establishment-labs-esta-stock-falls-12-on-hindenburg-short-report/.

©2023 InvestorPlace Media, LLC