On Monday, shareholders Kurt Ziegler and Daniel Brady filed a first amended class action complaint in the Southern District of California against GW Pharmaceuticals, PLC and their executives for alleged violations of Securities & Exchange Act for publishing an allegedly misleading proxy statement that led to an unfavorable merger for the shareholders of GW.
Currently, GW’s two premier products are Sativex and Epidiolex, which are prominent cannabinoid prescription drugs, with the former in late stage trials, the complaint explained.
In 2020, GW was approached by Jazz Pharmaceuticals to merge their companies, and agreed to for a high price of American Depositary Shares, and for nearly one hundred million dollars worth of bonuses and equity for their executives, according to court documents. In order to show the merger was fair, GW obtained a “fairness opinion” from their financial advisors, Goldman Sachs and Centerview, which the plaintiff says are “deeply flawed.” For their services, each company was paid $36 million. However, “Defendant [and CEO] Gover and his management team to prepare the significantly lower December Projections to provide to the Financial Advisors for use in their fairness opinions” where they reduced their revenue and earnings projections by 15-20% for every year from 2031-2035. However, they purportedly did not “genuinely believe” these projections and “knew that the numbers reflected therein were far below management’s genuine expectations regarding the Company’s future financial performance.”
Upon further review, these projections removed potential earnings from major projects that the company indicated it was working on, even after they were published, and despite exceeding expectations on revenue and results in their clinical trials, the plaintiffs alleged. They argued that this made it easier for the financial advisors to issue their fairness opinion so they could comply by standards, complete the merger and join the US market. As a result, the plaintiffs are suing for violations of Section 14(a) and 20(a) of the Exchange Act for their deceptive and misleading business practices.
The plaintiffs are seeking class certification, compensatory damages, rescissory damages, quasi-appraisal damages, pre- and post-judgment interest, disbursement, attorney’s fees and costs, and other relief.
The plaintiffs are represented by Monteverde & Associates PC and Kahn Swick & Foti, LLC.
