Farmmi

Kurta Law is investigating brokers who recommended shares of Farmmi Inc. (NASDAQ: FAMI). These shares were extremely high risk and may have been unsuitable for investors with moderate or conservative risk tolerance. The Financial Industry Regulatory Authority (FINRA) defines suitable investments as investments that fit an investor’s risk tolerance, as well as their age, financial goals, tax status, and other crucial investor characteristics.  

If you believe you may have lost money as a result of broker fraud or misconduct, contact Kurta Law securities attorneys for a free case evaluation. Call (877) 600-0098 or email info@kurtalawfirm.com.  

About Farmmi  

According to the prospectus, Farmmi primarily sells shitake mushrooms, mu er mushrooms, other edible fungi, and other agricultural products. Farmmi does not grow the mushrooms themselves but purchases them from third-party suppliers.  

The Offering  

The prospectus dated March 22, 2021, announced the offering of 6,469,467 ordinary shares. Farmmi initially offered shares for $1.15 per ordinary share. As of April 4, 2024, shares of Farmmi were trading for less than $1 per share.  

Farmmi Investment Risks 

Farmmi disclosed the following risks to the public. These are just a few highlights – you can read the full list starting on page S-4 of the prospectus. The prospectus is the document companies submit to the Securities and Exchange Commission when they register their stock offering. Issuers must register their stock offerings to comply with U.S. securities laws.  

Stock Market Volatility  

The prospectus warns that stock prices may be volatile: “During the last quarter of 2020, the market price of our ordinary shares fluctuated from a high of $1.45 to a low of $0.69 ordinary shares.” Once a stock falls below $1.00 per share, it is in danger of being delisted from the stock exchange.  

Future Capital Needs  

The prospectus states that Farmmi intends to use the proceeds from the stock offering for working capital. “The failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business.”  

Farmmi states that it will need additional capital. The company has incurred losses in the years since its inception. Collaborations that result in more capital may also mean that Farmmi must relinquish valuable rights to technologies, future revenue streams, or product candidates.  

Raising additional capital by issuing more shares may result in diluting the value of existing shares.  

Covid-19 Related Risks  

There are also risks related to the current pandemic. Covid-19 restrictions could affect the company’s suppliers, logistics service providers, and distributors. These disruptions are impossible to predict and could cause the company to underperform.  

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. 

Kurta Law Can Help  

Investors who wish to recover their losses may have to go through FINRA arbitration – most investment contracts come with a pre-dispute arbitration clause that requires investors to use FINRA arbitration rather than suing in civil court. FINRA arbitration is a distinct process from a civil suit and securities attorneys can guide you through the process. Our attorneys do not collect a fee unless you win your case. Call (877) 600-0098 or email info@kurtalawfirm.com.