Aerpio Pharma, Directors Sued After Aadi Merger Announcement

On Thursday, a lawsuit was filed against Aerpio Pharmaceuticals, President, CEO, Board Chairman, and various Directors in the Southern District of New York. The plaintiff, Gayle Weir, is an Aerpio shareholder who accused the defendant of violating the Securities Exchange Act during their merger with fellow pharmaceutical company Aadi.

In May 2021, the complaint said, the two companies entered into a merger agreement. As stipulated in the agreement, shareholders of Aerpio would own roughly 14.7% of shares in the new company. The merger required shareholder approval, the complaint said, and the plaintiff claimed that in order to obtain this vote, the defendant misrepresented and excluded certain information from the proxy statement.

First, the statement, which recommended that the shareholders vote in favor of the merger, allegedly failed to disclose financial projections. According to the suit, “Disclosure of the above information is vital to provide investors with the complete mix of information necessary to make an informed decision when voting on the Proposed Transaction … the above information would provide shareholders with a better understanding of the analyses performed by the Company’s financial advisor in support of its opinion.” 

The plaintiffs also stated that the financial advisors for Aerpio failed to disclose the “the inputs and assumptions” underlying the numbers and percentages that they arrived at. They further stated that “When a banker’s endorsement of the fairness of a transaction is  touted  to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed. Moreover, the disclosure of projected financial information is material because it provides shareholders with a basis to project the future financial performance of a company.”

Lastly, the plaintiff said the proxy statement “fails to disclose adequate reasoning as to why the Board agreed to a transaction in which the public stockholders of the Company, including Plaintiff, would receive nothing other than to have their shares diluted in value.” 

The plaintiff is represented by Lifshitz Law Firm.