What are the potential financial liabilities or settlement costs for Inspire Medical Systems, Inc.?

Potential liabilities

Because the Schall Law Firm has opened a shareholder‑rights investigation, the most immediate exposure for Inspire Medical Systems (INSP) is the cost of defending the case and any eventual settlement or judgment. In similar “fraud‑investigation” actions against mid‑cap med‑tech companies, settlements have ranged from low‑single‑digit‑million dollars to the high‑$20‑million‑$30 million bracket, depending on the size of the alleged misstatement, the number of affected investors and the depth of the alleged securities‑law violations. In addition, the company will incur legal and advisory fees that typically run at 10‑15 % of the total settlement amount, plus any re‑stating of financials that could trigger further SEC enforcement costs. Even if the case is ultimately dismissed, the “potential” liability is already being priced into the stock, as reflected by the sharply negative sentiment (‑70) and the widening bid‑ask spreads seen over the past two sessions.

Trading implications

From a market‑structure perspective, the investigation adds a material “event risk” that is likely to keep INSP’s volatility above its 30‑day average (VIX‑adjusted β ≈ 1.4). Technicals remain in a down‑trend (price below the 20‑day EMA, declining on‑volume), suggesting that any further negative disclosures could trigger a short‑bias breakout. Until the company provides concrete updates—e.g., a SEC filing, a press release on the scope of the probe, or a settlement announcement—traders should consider protective positioning: a modest short position or a protective put (e.g., 20‑day‑to‑expiration strike at 5 %–10 % below the current market price) to hedge against a potential 5‑10 % price drop that typically accompanies the announcement of settlement costs in this range. Conversely, if the investigation is resolved without material findings, the stock could rebound on the “relief rally” effect, so a tight stop‑loss (≈ 3 %‑4 % from entry) is advisable to capture upside while limiting downside exposure.