On December 2, 2020, analyst Culper Research issued a report entitled “OrthoPediatrics Corp. (KIDS): Even Channel Stuffing Can’t Save This Company,” in which Culper alleged that the Company “engaged in a channel stuffing scheme that has systematically and significantly overstated revenues.” Culper Research stated that its report was based, in part, on interviews with distributors and former executives. On this news, the Company’s stock price fell $4.12 per share, or about 9%.
On December 30, 2020,Culper Research tweeted that “a recent [Freedom of Information Act] request suggests that the Company is under an active SEC investigation,” citing a letter from the SEC implying that enforcement activities were underway. On this news, OrthoPediatrics’ stock fell $2.81 per share, or around 6%. Then on December 31, 2020, OrthoPediatrics confirmed reports of an SEC investigation, stating that it was “responding to a non-public, fact-finding inquiry” by the SEC that had been initiated after Culper Research’s December 2, 2020 report. The stock fell another 5%, or $2.32 per share.