Reports continue to be made of accounting and corporate governance irregularities for publicly traded companies based in China. These companies, which may be listed on stock markets in the U.S., Hong Kong, mainland China or some combination of the three have greatly increased in number over the past five years.
Reports in today’s Wall Street Journal outline continued shortcomings in the accuracy of reporting from these companies. The article specifically mentions Sino-Forest in regard to allegations that it misrepresented the actual timber holdings of this firm. The article goes on to discuss the sentiment, strong until recently, that these shortcomings could be ignored given the great growth of the Chinese market and GDP. Read more…
The Supreme Court ruled this week on a case that we have been watching closely. The Court’s decision in Matrixx Initiatives, Inc. et al. v. Siracusano et al. came down solidly on the side of the plaintiffs and leaves the biopharma industry (and all others) without a “bright line” test for reporting adverse events. Writing for the court, Justice Sotomayor, in a unanimous opinion, rejected the argument of Matrixx that adverse product reports must be “statistically significant” in order for a manufacturer to have an obligation to disclose the reports to investors. As a result of the Court’s decision, shareholders claims against Matrixx for its alleged failure to disclose reports that its product, Zicam, caused certain side effects for users will now be going forward through litigation.
Justice Sotomayor wrote that medical experts and the FDA rely on evidence other than statistically significant data to establish an inference of causation – “[i]t thus stands to reason that reasonable investors would act on such evidence.”
Matrixx’s argument to the Court urged the adoption of the “bright line” test that reports of adverse events with a pharmaceutical company’s product cannot be material absent a sufficient number of reports to establish statistical significance. Matrixx further argued that statistical significance is the only reasonable indicator of causation. Read more…
Various year-end securities litigation studies have shown exactly what one might expect, that cases involving financial services companies have dominated securities lawsuit filings for the last few years. What is surprising though is that plaintiffs’ attorneys have continued to pursue claims against companies in other industries, specifically the life sciences. Read more…
WGA client, Ironwood Pharmaceuticals, completed their initial public offering of stock earlier this week. Ironwood sold 16.7 million shares at $11.25 per share. They ended up their first day of trading up by more than 3%. The gross proceeds of over $187 MM were the most raised by a biotechnology R & D company since 2002. Their post-IPO market capitalization is over $1B.
One significant new expense for a company going public is the greatly heightened cost of Directors & Officers Liability Insurance. This is due to the increase in risk exposures arising out of a plethora of new shareholders. Securities litigation, in particular, becomes much more likely for publicly-traded companies. Read more…
Reports continue to be made of accounting and corporate governance irregularities for publicly traded companies based in China. These companies, which may be listed on stock markets in the U.S., Hong Kong, mainland China or some combination of the three have greatly increased in number over the past five years.
