Zynex, Inc. (ZYXI): Legal Storm Brewing—Is This Stock a Risk or an Opportunity?

In the volatile world of healthcare stocks, few companies are facing as intense a legal and financial reckoning as Zynex, Inc. (NASDAQ: ZYXI). Once a mid-cap player in medical devices, Zynex now stands at a crossroads: its future hinges on resolving a securities fraud class-action lawsuit, navigating a payment suspension by its largest insurer, and proving its revenue model isn’t built on sand. For investors, the stakes are high—and the clock is ticking.

The Legal Firestorm: What’s at Stake?

The lawsuits against Zynex, led by investors in Tuncel v. Zynex, Inc., accuse the company of inflating revenue through a deceptive “oversupplying scheme.” By shipping excessive medical supplies—such as electrodes and batteries—to patients, Zynex allegedly padded its top line by billing insurers like Tricare for unnecessary quantities. This practice, exposed in a June 2024 STAT report, triggered a 5% stock plunge and set the stage for the company’s unraveling.

The final straw came on March 11, 2025, when Zynex disclosed that Tricare had suspended payments, citing an ongoing review of prior claims. The stock collapsed by 51% in a single day, erasing billions in shareholder value.

Now, investors face a critical deadline: May 19, 2025, is the cutoff for shareholders to seek lead plaintiff status in the class-action lawsuit. Those who held ZYXI shares between March 13, 2023, and March 11, 2025, could be eligible to recover losses—if the claims succeed.

Financial Fallout: A 43% Revenue Collapse

The allegations aren’t just theoretical—they’ve had a seismic impact on Zynex’s bottom line. Q1 2025 results were catastrophic:
- Revenue plummeted to $26.6 million, a 43% decline from $46.5 million in the prior year.
- Gross profit margin shrank to 69%, down from 80%, as operational costs mounted.
- Adjusted EBITDA turned to a loss of $11.8 million, compared to a $1.7 million profit in Q1 2024.

CEO Thomas Sandgaard blamed the freefall on Tricare’s suspension, which accounts for 20–25% of Zynex’s annual revenue. Yet the lawsuits argue this was a self-inflicted wound: Zynex allegedly knew of Tricare’s scrutiny but failed to disclose the risks.

Regulatory and Operational Risks: Tricare’s Sword of Damocles

Tricare’s suspension isn’t just a temporary hiccup. If the insurer permanently excludes Zynex from its network—a real possibility—the company could lose its largest revenue stream overnight. Worse, the U.S. Department of Justice or SEC could launch their own investigations, leading to fines or penalties that could bankrupt the firm.

Meanwhile, Zynex’s restructuring—laying off 15% of staff to save $35 million annually—may not be enough. With no new Tricare payment updates by May 2025 and the FDA’s recent clearance for its TensWave device offering little near-term relief, the company is in survival mode.

Investor Implications: Act Now or Risk Irrelevance

For shareholders, the calculus is stark:
1. Immediate Risk: ZYXI’s stock remains volatile. Without Tricare’s payments or a legal settlement, further declines are likely.
2. Recovery Potential: If investors succeed in the class-action lawsuit, they could recoup losses. Firms like Robbins Geller and Hagens Berman are actively recruiting plaintiffs.
3. Deadline Pressure: Filing by May 19 is non-negotiable. Missing it means forfeiting any chance to lead or participate in recovery efforts.

Final Call to Action

Zynex, Inc. is a cautionary tale of overreach and opacity. The stock’s viability now depends on resolving its legal battles and Tricare impasse—neither of which look promising. Investors holding ZYXI must:
- Assess exposure: Calculate losses incurred between March 2023 and March 2025.
- Act by May 19: Contact lead law firms to secure lead plaintiff status and maximize recovery chances.
- Reassess holdings: Consider exiting the stock entirely if the risks outweigh potential rewards.

In the end, ZYXI’s story isn’t just about a single company—it’s a lesson in the perils of financial engineering and the speed at which missteps can unravel a business. The clock is ticking. Don’t let your capital be the next casualty.

DISCLAIMER: This analysis is for informational purposes only. Consult a financial advisor before making investment decisions.