Valeant and Ackman must face an insider trading lawsuit
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In another setback for Valeant Pharmaceuticals, a federal judge ruled that a lawsuit accusing the drug maker and one of its major shareholders of insider trading could be brought.
The lawsuit filed by shareholders alleges that Valeant, hedge fund manager William Ackman and Pershing Square Capital Management breached securities laws by failing to disclose legally required information because of their failure to buy Allergan. The $ 51 billion unsolicited bid for Allergan, which is best known for the sale of Botox, was launched in April 2014.
This is not the first time that insider allegations against Valeant and Ackman have been made. Last year, Allergan brought a lawsuit accusing Valeant, Ackman and Pershing of violating securities laws as a result of a complicated arrangement that was "overdue". they had concluded to pursue Allergan
In November 2014, a federal judge said that their arrangement was problematic, but he let them proceed with their takeover bid on Allergan. However, Allergan was soon acquired by Actavis and abandoned the lawsuit last April. Actavis now uses Allergan's name, if you remember.
The arrangement between Valeant and Ackman is also at the center of the last trial. Shareholders, including the state pension funds of Ohio and Iowa, contend that Valeant and Ackman failed to disclose crucial elements of their financing and financing plan. acquisition of Allergan.
Prior to the auction, Pershing quietly purchased a 10% stake in Allergan, which gained value after Valeant announced his bid. Shareholders argue that Pershing broke the law by acquiring shares of Allergan before Valeant disclosed his intention to bid for Allergan. This constituted "material, non-public information" according to the lawsuit brought by the shareholders.
Securities laws prohibit a person with anticipated knowledge of an imminent offer to buy shares of the target company. The rule is intended to protect companies against the simultaneous blindness of a hostile buyer and allied shareholders.
In his 23-page Judgment Judge David Carter of the US District Court in California, who oversaw the earlier lawsuit filed by Allergan, noted that he had written the following. last year to find out if any significant steps have been taken to launch a public tender offer. "
He always maintains this point of view. "In this case, [Valeant, Pershing, and Ackman] has not raised any argument that alters the prior review of the Court on this issue," Carter wrote. The "basic allegations on this issue are virtually identical to those made" in the lawsuit brought by Allergan.
We must note that Carter has not rendered judgment on the merits of the claims, but simply determined that there are sufficient reasons to allow shareholders to have the opportunity to prove their cause.
As for Valeant, a spokesperson wrote to us that "we have acted at all times in consultation with our legal counsel and remain convinced that our actions were in accordance with securities laws. While we are disappointed that the court allowed the claims to continue to follow this preliminary motion, we are eager to present evidence to establish that we have not done anything improper. "
We have asked Pershing to comment and we will forward any response we receive.
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