Assessing the Legal and Governance Risks Facing Neogen Corporation (NEOG): A Deep Dive into Securities Fraud Allegations and Investor Recourse

Neogen Corporation (NASDAQ: NEOG) has become a focal point for securities fraud allegations and corporate governance scrutiny, with a class-action lawsuit accusing the company and its executives of misleading investors about the integration of the 3M Food Safety Division. The lawsuit claims that Neogen downplayed operational inefficiencies and integration challenges, leading to a $461 million goodwill impairment charge in January 2025 and a 79% stock price decline by mid-2025 [1]. These revelations, coupled with material weaknesses in internal controls and leadership instability, have raised urgent questions about investor protection and corporate accountability.

Governance Failures and Financial Mismanagement

Neogen’s governance failures began to crystallize in early 2025 when the company disclosed material weaknesses in its internal controls over financial reporting, as noted in SEC filings [2]. These weaknesses were attributed to integration challenges with the 3M acquisition, which led to inflated financial guidance and a failure to account for operational inefficiencies. For instance, Neogen’s leadership allegedly overstated the success of the integration while concealing a $100 million in unplanned costs tied to the acquisition [3]. The fallout was severe: a 28% stock price drop in April 2025 after a $11 million loss and revenue decline were announced, followed by a 17% drop in June 2025 when EBITDA projections were revised downward [4].

The company’s board has undergone significant restructuring in 2025, including the retirement of long-serving director James P. Tobin and the appointment of Andrea Wainer and Avi Pelossof to bring expertise in diagnostics and healthcare [5]. However, these changes have not resolved the underlying governance issues. Neogen’s former CEO, John Adent, resigned in 2025 amid the crisis, and the CFO, David Naemura, certified the existence of material control deficiencies in SEC filings [6]. Academic research underscores the broader implications of such governance lapses, showing that companies with similar issues underperform peers by significant margins and suffer large shareholder value losses [7].

SEC Scrutiny and Investor Recourse

While the U.S. Securities and Exchange Commission (SEC) has not yet imposed direct penalties on Neogen, the company faces multiple investigations and lawsuits that could trigger regulatory action. The class-action lawsuit, filed under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, seeks to represent investors who purchased shares between January 5, 2023, and June 3, 2025 [8]. Lead plaintiff motions are due by September 16, 2025, with law firms like Robbins Geller and the Rosen Law Firm offering to represent shareholders without upfront legal fees [9].

The SEC’s broader enforcement priorities in 2025—focusing on director independence, accurate proxy disclosures, and internal control effectiveness—add context to Neogen’s challenges [10]. For example, a 2024 SEC enforcement action against another NYSE-listed company for misrepresenting director independence highlights the regulator’s heightened scrutiny of governance practices [11]. Neogen’s material weaknesses in internal controls and leadership turnover could draw similar attention, particularly if the ongoing lawsuits result in a finding of securities law violations.

The Path Forward for Investors

For investors, the case underscores the importance of legal recourse in securities fraud. The class-action lawsuit provides a mechanism for shareholders to seek compensation for losses tied to Neogen’s alleged misrepresentations. However, the absence of direct SEC penalties as of August 2025 suggests that regulatory action remains a possibility rather than a certainty [12]. Investors should also monitor Neogen’s governance reforms, including its board restructuring and internal control improvements, to assess whether these measures can restore market confidence.

The broader lesson for the investment community is clear: governance failures and integration mismanagement can have catastrophic financial consequences. Neogen’s case aligns with academic findings that such issues often lead to significant market underperformance and shareholder value erosion [13]. As the legal and regulatory landscape evolves, investors must remain vigilant about corporate transparency and accountability.

Source:

[1] Neogen Corporation Class Action Lawsuit - NEOG [https://www.rgrdlaw.com/cases-neogen-corporation.html]
[2] EX-23 [https://www.sec.gov/Archives/edgar/data/711377/000095017025100064/neog-ex23.htm]
[3] The Risks and Opportunities in Neogen Corporation's Ongoing Securities Class Action Litigation [https://www.ainvest.com/news/risks-opportunities-neogen-corporation-neog-ongoing-securities-class-action-litigation-2508/]
[4] Class Action Filed Against Neogen Corporation (NEOG) [https://www.cbs42.com/business/press-releases/accesswire/1065749/class-action-filed-against-neogen-corporation-neog-over-securities-violations-contact-levi-korsinsky-today]
[5] Neogen Announces Board Transition with Appointment of ... [https://finance.yahoo.com/news/neogen-announces-board-transition-appointment-200500882.html]
[6] EX-31.2 [https://www.sec.gov/Archives/edgar/data/711377/000095017025052497/neog-ex31_2.htm]
[7] The Risks and Opportunities in Neogen Corporation's ... [https://www.ainvest.com/news/risks-opportunities-neogen-corporation-neog-ongoing-securities-class-action-litigation-2508/]
[8] Neogen Corporation: A Case Study in Securities Litigation ... [https://www.ainvest.com/news/neogen-corporation-case-study-securities-litigation-governance-failures-path-rebuilding-market-trust-2507/]
[9] NEOG INVESTOR ALERT: Robbins Geller Rudman & ... [https://www.globenewswire.com/news-release/2025/07/19/3118231/0/en/NEOG-INVESTOR-ALERT-Robbins-Geller-Rudman-Dowd-LLP-Announces-that-Neogen-Corporation-Investors-with-Substantial-Losses-Have-Opportunity-to-Lead-the-Neogen-Class-Action-Lawsuit.html]
[10] SEC Actions in Review: What Officers and Directors Should Know in 2025 [https://www.foley.com/insights/publications/2025/01/sec-actions-review-officers-directors-know-2025/]
[11] SEC Actions in Review: What Officers and Directors Should Know in 2025 [https://www.foley.com/insights/publications/2025/01/sec-actions-review-officers-directors-know-2025/]
[12] Neogen Corporation: A Case Study in Securities Litigation ... [https://www.ainvest.com/news/neogen-corporation-case-study-securities-litigation-governance-failures-path-rebuilding-market-trust-2507/]
[13] The Risks and Opportunities in Neogen Corporation's ... [https://www.ainvest.com/news/risks-opportunities-neogen-corporation-neog-ongoing-securities-class-action-litigation-2508/]