In a dramatic turn for one of Colorado’s high-profile healthcare companies, a federal judge has preliminarily approved a $27 million settlement between InnovAge Holding Corp., its IPO underwriters, and a class of investors who allege they were misled by the company’s 2021 stock debut — only to watch their investments unravel after a government crackdown exposed deep flaws.
U.S. District Judge William J. Martinez signed off on the tentative agreement Tuesday, greenlighting a deal that marks the culmination of three years of litigation and a searing lesson in the risks of public market hype amid regulatory blind spots.
The IPO That Soared—Then Crashed
When InnovAge launched its initial public offering in March 2021, shares opened at $21 and soared to nearly $26 in a matter of days. But the honeymoon ended abruptly when a Centers for Medicare & Medicaid Services (CMS) audit led to the closure of an InnovAge center in California.
CMS investigators concluded the facility had “substantially failed” to deliver services required under PACE — the Program of All-Inclusive Care for the Elderly. The news sparked a stock price free fall, plunging from $14 to $6.76, according to court documents.
Then came another blow: InnovAge revealed that all Colorado-based centers — representing more than half of its total revenue — had their enrollments suspended by both CMS and state regulators over similar patient care issues, many allegedly predating the IPO.
The share price collapsed further, ultimately representing a 78% decline from the IPO’s peak — devastation for investors who claimed they were never warned of such risks.
