ChromaDex

Kurta Law is investigating recommendations of ChromaDex (CDXC) stock for their potential unsuitability for investors. As disclosed in the company’s prospectus, shares of this stock are high-risk. Brokers who recommend overly risky investments to their clients may be in violation of securities regulations.

If you lost money on your shares of ChromaDex stock, consider contacting a securities attorney. You may be able to recover losses through FINRA arbitration, the process brokerage firms often require investors to use over pursuing a case in civil court. Contact a securities attorney to review your case today: (877) 600-0098 or info@kurtalawfirm.com.

What is ChromaDex?

According to the prospectus, ChromaDex (CDXC) is a quality-control business that provides research, products, and services to companies in the natural products industry, e.g., pharmaceutical, dietary supplement, cosmetic, and food and beverage companies.

More specifically, ChromaDex purportedly provides phytochemical reference standards for use in chemical research and development, as well as “chemistry-based analytical services” generally used for quality control in the dietary supplement industry. The company also produces BlueScience dietary supplements and sells its proprietary ingredient, pTeroPure, to other companies.

The company’s strategy focuses on acquiring and commercializing new products, including guiding them through clinical trials to achieve regulatory approval.

BBB National Advertising Division Challenge

In 2021, the Better Business Bureau National Programs National Advertising Division (NAD) challenged claims made by ChromaDex in advertisements for its Tru Niagen dietary supplement. ChromaDex had advertised that the product “increases energy,” a claim repeated in a testimonial by former NFL star Shannon Sharpe.

ChromaDex discontinued the testimonial and the claims in question.

FTC Warning Letter

On November 17, 2020, the Federal Trade Commission sent ChromaDex a warning letter alleging that certain of its Tru Niagen products, marketed online as “intended to mitigate, prevent, treat, diagnose, or cure COVID-19” were in violation of the Federal Food, Drug, and Cosmetic Act because they lacked FDA approval.

What are the Risks Associated with ChromaDex?

ChromaDex describes the risks associated with its stock in its prospectus. Some of these risks concern the company’s financial situation: it has a “history of operating losses,” a pattern that it expects to continue “for the foreseeable future.”

Relatedly, the company has “never paid cash dividends on [its] capital stock and [does] not anticipate” doing so in the future. Without dividends, investors will only make a profit on their stock if its price rises.

Product Liability Claims

ChromaDex may be subject to product liability claims. Its products are “not necessarily subject to pre-market regulatory approval in the United States” in “most cases,” and certain products may contain ingredients that “do not have long histories of human consumption.”

Unexpected side effects or reactions, and insufficient disclosures of these possible effects, could lead to costly product liability claims that could have “a materially adverse effect” on the company.

Changes in Consumer Perception of Supplements

ChromaDex considers consumer perception a significant influence on the success of products in the nutritional supplement market and notes that factors such as “scientific research or findings, regulatory investigations, litigation, [and] national media attention” can have severe negative effects on the market.

Since the success of its business hinges on the “size and growth rate of the vitamin, mineral, and dietary supplement market,” ChromaDex may be similarly threatened by any unexpected changes in consumer perception of supplements.

Minimal Trading Activity

The prospectus describes ChromaDex’s stock as “thinly traded” on the OTC Bulletin Board, and that trading activity may be “minimal or non-existent” for days or months at a time. ChromaDex cites its small size, lack of stock analyst and broker familiarity with its stock, and lack of proven viability as reasons its stock may be thinly traded.

Reliance on Foreign Suppliers

ChromaDex states that it relies on foreign suppliers for a “significant amount of key ingredients” for its products, especially suppliers in India. This reliance comes with risks associated with quality assurance, compliance with domestic and foreign trade regulations, and expenses incurred due to shipping delays.

Aegis Capital Corp. Underwriting  

Investors should know that Aegis Capital Corp. served as the underwriter for this offering. Underwriters take on risk in exchange for a fee, which could motivate certain investment banks to underwrite investments that pose too much risk for the average retail investor. Additionally, brokers may have conflicts of interest when they recommend shares that are underwritten by an affiliate of their brokerage firm. 

Do You Have Concerns Related to Your Shares of ChromaDex?

If you believe ChromaDex was too high-risk for your profile, consider contacting one of our experienced securities attorneys today. Kurta Law attorneys have 5-star reviews on Google and regularly take on cases of broker misconduct and unsuitable investment recommendations. Call (877) 600-0098 or email info@kurtalawfirm.com.