22nd Century Group is denying a short-seller's claim that the Clarence-based tobacco products company could be under investigation by federal securities regulators.
The anonymous short seller, who goes by the name Fuzzy Panda Shorts, published an article on the Seeking Alpha website on Thursday that included a copy of a letter from the Securities and Exchange Commission, that it said could be interpreted as meaning there was an active investigation underway that involved 22nd Century.
22nd Century's shares fell by 4 percent on Thursday and were down another 2 percent by early Friday afternoon. Short-sellers profit when the price of a stock goes down.
“By publishing such a grossly misleading ‘hit piece,’ the unscrupulous short seller attempts to create a self-fulfilling prophecy – of a declining share price of a target company,” said Henry Sicignano III, the company's president and CEO.
22nd Century said the letter from the SEC published in Fuzzy Panda's article was addressed to an individual named Steve McGough. The company said the excerpt the short-seller published omitted a line from the SEC that said its letter should not be interpreted as implying that the company had violated any laws.
22nd Century is developing technology that can alter nicotine levels in tobacco, which the company believes could be useful in launching very low nicotine cigarettes that are less addictive and could be used as a smoking cessation tool. However, the short-seller said 22nd Century has not submitted a new application for federal regulatory review of its so-called modified risk tobacco products after pulling its original application almost two years ago.
The SEC letter was in response to a Freedom of Information Act request by the short-seller requesting any documents pertaining to investigations involving 22nd Century Group. The SEC denied the request. "We have confirmed with staff that releasing the withheld information could reasonably be expected to interfere with ongoing enforcement proceedings," the letter posted with the article said.