RenovaCare Inc., a biotechnology firm, has agreed to a $2 million deal to settle a class action lawsuit accusing the company of inflating its stock prices through a covert paid promotional campaign. The agreement was submitted for preliminary approval to a New Jersey federal judge, according to court filings on Monday.

Investors Seek Approval for Settlement

RenovaCare investors Diana Deidan and Marc Jay Gannon filed the motion in Newark federal court, requesting U.S. District Judge Brian R. Martinotti to approve the $2 million settlement. The investors explained that the settlement represents roughly 7% of the maximum damages they could have won at trial. Despite the modest percentage, they deemed it a strong recovery, particularly considering the risks of achieving a smaller payout—or none at all.

"This is an excellent recovery, especially when factoring in the potential risk of no recovery at all, which is common in securities class actions," the investors stated in their filing.

RenovaCare $2M Deal : Allegations of Stock Pumping

The lawsuit accused RenovaCare, a company with no revenue or commercialized products, of secretly funding a promotional campaign to inflate its stock prices. The campaign was allegedly carried out by StreetAuthority, an online financial publishing firm, and its owner Lou Betancourt, who were paid to produce favorable reports on the company.

The core of the campaign centered on promoting RenovaCare's experimental medical device, the SkinGun, which is designed to spray healing cells onto burn wounds. The lawsuit alleged that RenovaCare’s then-interim CEO supplied StreetAuthority with misleading information about the SkinGun and even participated in editing and shaping the promotional content.

Legal Representation and Court Proceedings

The settlement negotiations bring an end to a high-stakes battle in which RenovaCare and several third-party entities were implicated in the alleged stock price manipulation. RenovaCare’s legal team, led by Joseph Dever and Tamar Wise of Cozen O'Connor, declined to comment on the settlement.

Investors in the class action are represented by attorneys from several prominent firms, including Hagens Berman Sobol Shapiro LLP, Pomerantz LLP, and Lite DePalma Greenberg & Afanador LLC.

RenovaCare $2M Deal : Conclusion of the Campaign

As part of the settlement, the lawsuit claims that RenovaCare used third-party funds to finance the StreetAuthority promotions. The promotional materials allegedly painted a rosier picture of the company’s prospects, contributing to inflated stock prices.

The case underscores the complexities of securities litigation and highlights the risks companies face when engaging in questionable promotional practices. The $2 million settlement offers some relief to the investors, though the case serves as a cautionary tale of the potential pitfalls in the biotech industry.