A class action lawsuit was filed against Dentsply Sirona Inc. (XRAY) by Levi & Korsinsky on November 26, 2024. The plaintiffs (shareholders) alleged that they bought XRAY stock at artificially inflated prices between December 1, 2022 and November 6, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Dentsply Sirona stock during that period can click here to learn about joining the lawsuit.
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Dentsply Sirona is engaged in the development and manufacture of dental care products and technology.
In 2020, Dentsply acquired two direct-to-consumer dental aligner businesses, Byte and SureSmile. The company’s tall claims about the performance and expectations from the sale of Byte aligners are at the heart of the current complaint.
Dentsply Sirona’s Misleading Claims
According to the lawsuit, Dentsply and three of its current and/or former senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about certain sales and growth strategies related to Byte aligners and ancillary issues from SEC filings and related material.
For instance, during the Class Period, the company’s CEO mentioned at an Evercore ISI HealthCONx Conference that he believed Byte could become an important and integral part of the Dentsply portfolio in the future. The management indicated a commitment to derive more value from the Byte and SureSmile segments.
Furthermore, at the J.P. Morgan Healthcare Conference on January 11, 2023, the CFO noted that the company was happy about the performance of Byte and SureSmile segments (Ortho business), which cater to the direct-to-consumer (DTC) clear aligner business.
Finally, during the earnings call for Fiscal 2022, the CEO stated that Byte performed extremely well in the past two quarters with a good customer satisfaction review on the My Byte App.
However, subsequent events (discussed below) reveal that Dentsply Sirona wilfully misled investors about the expectations and customer feedback for its Byte products.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business practices and prospects during the Class Period.
Importantly, the Defendants are accused of misleading investors about the prospects of Byte aligners since they were allegedly selling them to consumers who were ineligible for such dental treatment to bolster their revenue figures and expectations. The company also ignored numerous patient complaints of injuries and failed to notify the FDA (Food and Drug Administration) about them.
The information became clear on events that occurred on October 24, 2024 and November 7, 2024. On the latter date, the company released its Q3 FY24 results. Dentsply reported a one-time non-cash goodwill impairment charge of $495 million in the Orthodontic and Implant Solutions segment. What’s worse, the company also slashed its Fiscal 2024 projections for organic sales. Following the news, XRAY stock plunged over 28% on the same day.
To conclude, the defendants allegedly misled investors about the growth expectations from the sale of the company’s Byte aligner products. In the past year, XRAY shares have plunged 43.4%, causing substantial damage to shareholder returns.
