Ekso Investor Gets Jail Time: What Does That Mean for the Company?

Qmed Staff

June 4, 2015

4 Min Read
Ekso Investor Gets Jail Time: What Does That Mean for the Company?

The investment banker Adam Gottbetter has been hit with a $4.6 million fine and 1.5 years of jail time for stock manipulation. Ekso Bionics, a company Gottbetter has heavily invested in and helped go public in 2012, has seen its stock tumble after the news.

Qmed Staff

Ekso Bionics (Richmond, CA), a maker of robotic exoskeletons that can help paralyzed patients walk, appears to be in a perilous financial situation after one of its primary investors, Adam S. Gottbetter, was arrested and sentenced to 1.5 years of prison time.

An SEC statement regarding Gottbetter does not explicitly mention his involvement with Ekso, but states that he will be banned from the penny stock industry. Ekso Bionics' stock, which fell on June 3 by 24.28% to $1.36, is classified as a penny stock under SEC's definition.

Ekso insists that Gottbetter is no longer affiliated with the company and that the company is not aware of an SEC or DOJ investigation.

Despite launching impressive technology that has received glowing mainstream media attention (including being cited by Time as one of the "50 Best Innovations of 2010."), the company has been unable to turn a profit. Last year, the company had a deficit of $71 million. In 2013, the company was forced to furlough 30 of its 71 employees, according to an SEC document.

An analysis by Seeking Alpha claims that the company could go bankrupt in the near future: "With less than $6m of revenue and--$15m per year cash burn rate, EKSO will run out of cash again in early 2016. EKSO's CEO Nathan Harding presided over near-bankruptcy in 2013  and was forced to stop paying approximately half of EKSO employees. The only  meaningful capital the company has been able to raise was done with partners now jailed for fraud or  charged with other violations. Given everything above, EKSO's current ~$ 130m  valuation, or >20 x revenue, is clearly absurd and due for a correction."

The site MacroAxis estimates the firm's likelihood of going bankrupt to only by 2%.

An FAQ released by Ekso Bionics on June 4 called the Seeking Alpha piece states:

The Company believes that it was unfairly attacked and disparaged in an article posted anonymously by someone who we are informed is a short seller who frequently attacks companies in this way.  While the Company fully respects the right of third parties to express their opinion regarding the Company, it takes issue where such expression is published anonymously and laden with false, misleading and selective information and when, as the Company believes is the case, such expression is intended to drive down the Company's stock price.  Based on the allegations in the article, the Company believes that the author either purposefully ignored or failed to learn the true facts about the Company, its products and the developments that have occurred since the Company became public in January 2014.

Seeking Alpha also points to public information that suggest that competing exoskeletons from Parker Hannifin and ReWalk are largely superior to Ekso's with a price point ($69,000 vs. $60,000 vs. $110,000 respectively). The ReWalk device has been cleared by FDA, and is capable of climbing stairs, is slightly lighter than Ekso's device, and can walk substantially faster as evidenced by this video. The Indego from Parker Hannifin, by contrast, weights 27 lbs. as opposed to 48 lbs. for the Ekso technology.

While the aforementioned Seeking Alpha piece suggests that Gottbetter was involved in a "pump and dump" scheme with Ekso, an article by the analyst Keith Fitz-Gerald of Total Wealth Research claims the company is the victim of a "short and distort" scheme by analysts are actually interested in buying driving the company's stock down so they can later buy it at a bargain price.

In its FAQ, Ekso declines refuting the Seeking Alpha piece in a point-by-point fashion, stating that it is the firm's "policy not to respond to commentary, speculations or opinions expressed in non-expert forums or financial blogs.  The Company, therefore, currently does not intend to respond further to the misstatements and selective information contained in the above-referenced SeekingAlpha article."

An April 2015 article about the company in the San Francisco Business Times was more upbeat about the company, citing sources that predict the company will be profitable by 2018 with a rich product road map. 

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