NEW YORK (AP) -- Shares of Cyberonics Inc. rose Monday on news that a former employee had dropped his lawsuit against the neurological device maker.
THE SPARK: Cyberonics said that Andrew Hagerty voluntarily dropped the lawsuit he had filed in federal district court in Massachusetts.
THE BIG PICTURE: Hagerty, a former sales representative for the company, had sued for wrongful termination. The company argued that, under the terms of his employment, Hagerty's claims were subject to binding arbitration.
Hagerty has the right to refile the lawsuit or to pursue a resolution through binding arbitration.
THE ANALYSIS: Jefferies analyst Raj Denhoy backed his "Buy" rating for Cyberonics. He noted that Hagerty made significant allegations of broad-based improprieties in terms of sales and marketing practices at the company.
"While we had viewed the suit as likely without merit, this nonetheless removes an overhang on the stock given the investor concerns around the risk of the suit ultimately becoming something larger," Denhoy wrote in a note to investors.
THE SHARES: Up $2.70, or 6.1 percent, to $47.05 in afternoon trading, after peaking at $48.93 earlier in the session. Over the past 52 weeks, the company's shares have traded between $33.48 and $56.73.