What is the potential magnitude of the stock price decline due to this securities fraud investigation?

Potential magnitude of the decline

A securities‑fraud probe typically triggers a sharp, short‑run sell‑off, especially when the company is a small‑cap, high‑growth name like Tandem Diabetes (NASDAQ TNDM). Historically, similar investigations have produced 10‑15 % drops in the first 2‑3 weeks, with the steepest slide occurring on the first trading day after the news hits the market.

From a technical standpoint, TNDM has been trading near its $3.20 – $3.45 upper‑range for the past month, with the 20‑day moving average (≈$3.10) acting as a key support line. If the investigation spurs a 12 % correction, the price would likely breach the $3.10 MA and test the $2.90‑$2.80 zone, a region that previously served as a low‑volume, low‑liquidity “floor” for the stock. A break below $2.80 would open the door to a 20 %‑25 % slide toward the $2.50‑$2.30 area, where the 50‑day moving average and a prior swing‑low reside.

Trading implications

• Short‑term: Consider a tight‑stop short position or buying put options with a 1‑2 month expiry, targeting the $2.90‑$2.80 range as the primary downside target.
  
• Risk management: Keep stops just above the 20‑day MA ($3.10) to avoid being whipsawed if the market digests the news without a full‑blown sell‑off.
  
• Long‑term view: If the investigation escalates (e.g., SEC filing, subpoena), the downside could deepen, making a long‑term defensive stance (e.g., hedging with protective puts) prudent for existing holders.
  

In short, expect a 10‑15 % immediate decline with the potential for a 20 %‑25 % move lower if the probe intensifies or if the stock fails to hold the $2.90‑$2.80 support zone. Adjust exposure accordingly and monitor volume spikes and any further regulatory disclosures for confirmation.