Genetic Technologies
Kurta Law is investigating brokers who recommended shares of Genetic Technologies (NASDAQ: GENE). These shares came with a significant degree of risk, which brokers should have communicated to their investors. The risks are clearly stated in the stock offering prospectus. The prospectus is the document that issuers use to register their investment with the Securities and Exchange Commission. If your broker misrepresented Genetic Technologies investments or recommended them even though you specified a moderate to conservative risk tolerance, you may have a case for a securities attorney.
Our securities attorneys offer free case evaluations. Call (877) 600-0098 or email info@kurtalawfirm.com.
The Offering
The prospectus supplement dated May 22, 2019, announced an offering of 221,421,450 of ordinary shares, represented by 1,476,143 of American Depository Shares (ADS). American Depository Shares are shares issued by a foreign company that are listed on an American exchange in USD. The offering also features warrants to purchase 1,107,107 ADSs to certain institutional investors.
What is Genetic Technologies Limited?
According to the prospectus, Genetic Technologies is a molecular diagnostics company that offers predictive testing and assessment tools. It states that its lead product, BREVAGenplus, is a risk-assessment test for non-hereditary breast cancer.
Risks Associated with Genetic Technologies
The high degree of risk associated with shares of Genetic Technologies is clearly disclosed in the prospectus. Keep reading for just a sample of the risks – you can see the complete list on page S-6 of the prospectus.
Unique Risks Associated with the Biotechnology Sector
The prospectus states that the biotechnology sector can be vulnerable to abrupt changes in investor sentiment. Stock prices can experience volatility that has nothing to do with the company’s performance.
Risks Related to a Foreign Issuer
The majority of the directors and officers of Genetic Technologies reside outside of the U.S., which will make it difficult for shareholders to enforce judgments against management issued by U.S. courts. Foreign issuers do not have to disclose the same information as U.S.-based issuers, which creates more risk for investors.
NASDAQ Deficiency Notice
The prospectus discloses that Genetic Technologies received a NASDAQ deficiency letter on January 24, 2019. NASDAQ requires shares to maintain a trading price of at least $1 per share. At the time of the prospectus, Genetic Technologies had not yet gained compliance.
History of Incurring Losses
Since its start in 1989, Genetic Technologies has incurred losses every year except 2011.
Management Discretion
Genetic Technologies management had broad discretion to determine how to use the proceeds from the offering. As the prospectus states, “Our management’s judgment may not result in positive returns on your investment.” Shareholders do not get to evaluate information on which management bases its decisions.
Immediate, Substantial Dilution
The offering price for these shares was substantially higher than the tangible book value of the shares, meaning investors would experience dilution as soon as they purchased shares.
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
If you believe your broker engaged in misconduct when they recommended shares of Genetic Technologies, get in touch with Kurta Law. You have a limited timeframe to file a claim and our attorneys do not collect a fee unless they win your case. Call (877) 600-0098 or email info@kurtalawfirm.com to speak with an experienced investment fraud attorney.