New Securities Lawsuit Intensifies Legal Risks for Inspire Amid Growth Slowdown

What happened

Levi & Korsinsky has filed a class action securities lawsuit against Inspire Medical Systems, alleging fraud from August 2024 to August 2025. This adds to existing legal overhangs, including a DOJ CID and IP litigation with Nyxoah, as noted in the DeepValue report. Inspire's revenue growth has decelerated from ~29% in 2024 to ~10.8% in Q2-2025, pressured by GLP-1 therapies and new neuromod competitors. The stock trades at a ~65% premium to its DCF value with rich multiples, despite high margins and positive free cash flow. The fresh litigation compounds operational challenges, heightening uncertainty for investors.

Implication

This lawsuit could drain cash reserves through settlements and legal fees, diverting management focus from critical initiatives like the Inspire V rollout. It amplifies governance concerns, potentially eroding investor trust and leading to further share price pressure. Combined with decelerating revenue and competitive threats, the legal risk may compress valuation multiples, limiting upside. Existing holders face heightened downside from prolonged legal battles, while new capital remains unjustified without clear signs of growth reacceleration or favorable legal outcomes. Overall, the risk/reward deteriorates, aligning with the report's 'POTENTIAL SELL' stance.

Thesis delta

The DeepValue report already identified legal risks, but this new securities lawsuit specifically alleges fraud during a period of growth deceleration and product transition. This shift reinforces the 'POTENTIAL SELL' thesis by introducing immediate litigation that could exacerbate financial strain and reputational damage, making the current valuation even more unsustainable.