Shares of organ transplant innovator TransMedics Group (TMDX -4.00%) fell 15.7% through Thursday trading, according to data from S&P Global Market Intelligence.

TransMedics was the target of an activist short-seller late last week, and on Monday of this week, the company responded to the accusations at an industry health conference.

While the stock initially bounced back a bit after the conference, it continued to fall through the week, as investors still appear to be skittish over the controversy.

Scorpion attacks

Last Friday, Scorpion Capital published a 342-page short report -- yes, 342 pages! -- detailing an alleged six-month investigation into TransMedics and its business practices.

TransMedics has developed a new type of organ transplant technology called the Organ Care System (OCS), which provides oxygen and nutrients to organs during transport. This new technology aims to supplant the current standard of cold storage, which is basically freezing the organ.

Scorpion's report includes a number of allegations. Some of these are that the OCS doesn't work nearly as well as the company lets on, that TransMedics uses thuggish tactics to get hospitals to take on its organs and to push sales, and that the company has antagonized customers by withholding organs if payments haven't come through. Scorpion also pointed to emerging competitive concerns, among other issues.

On Monday, TransMedics gave a full-throated defense of its business in a press release, and also in its presentation at the J. P. Morgan Healthcare Conference. The press release said Scorpion's report had "no merits" and that it "fails to accurately represent TransMedics' business, technology, diverse culture and steadfast focus on delivering exceptional products and services to meet the needs of the global transplant community." The company also said it was engaging a law firm to discuss legal options.

In the first part of his presentation at the conference, CEO Waleed Hassanein suggested that since TransMedics is in the process of disrupting established players in organ transplant, those competitors may be "driving a lot of the dynamics you guys are seeing" regarding the short report.

Who should investors believe?

TransMedics can't seem to catch a break recently, as the company disappointed investors with a growth slowdown in its third-quarter earnings release and fourth-quarter guidance. Its CFO also stepped down back in December. The stock is now down 66% from its all-time highs, reached just this past summer.

If the Scorpion report turns out to have some truth, there is obviously further downside. However, if TransMedics is correct and its technology and business are eventually vindicated, the upside potential is still substantial, according to the company's long-term guidance.

Interested investors may want to take a page out of Peter Lynch's book and "invest in what you know." For instance, if you happen to know a surgeon, other physician, nurse, or administrator who works with organ transplants, questioning them as to whether they've worked with TransMedics' OCS and how they did with the technology could yield insights into this controversial stock. Otherwise, it may be hard to build conviction until more information comes to light.