Paragon 28, Inc. (NYSE: FNA)

Medical device company Paragon 28 is facing mounting scrutiny over its financial reporting practices. Hagens Berman, a prominent shareholder rights firm, has initiated a probe, investigating whether the company may have intentionally manipulated its financial statements.

At the heart of the investigation is Paragon 28’s inventory accounting and the effectiveness of its internal controls. Doubts about the company’s financial integrity were first raised on April 4, 2023, when CFO Stephen Deitsch abruptly resigned. The news sent shockwaves through the market, causing the company’s share price to plummet by over 15%.

The situation escalated dramatically on July 30 when Paragon 28 announced that its previously reported financial results for 2023 and the first quarter of 2024 were unreliable. The company admitted to material weaknesses in its internal controls and disclosed significant accounting errors. Specifically, Paragon 28 understated its cost of goods sold by 19%, resulting in an overstated operating loss by 22% and net loss by 20%. This revelation triggered another sharp decline in the company’s stock price, falling nearly 14%.