Revised Complaint Filed in Vaxart Vaccine Securities Litigation Amid Partial Settlement

On December 9, plaintiffs in In Re Vaxart, Inc. Securities Litigation filed a Corrected Second Amended Consolidated Class Action Complaint.  The plaintiffs allege a “pump and dump” scheme to inflate the value of Vaxart stock by falsely representing that Vaxart was in a position to profit from development of a COVID-19 vaccine through participation in Operation Warp Speed.

According to plaintiffs, the alleged stock price inflation allowed hedge fund Armistice Capital, which controlled Vaxart, to reap approximately a quarter of a billion dollars in profit during the class period by selling shares of Vaxart.

There are two Lead Plaintiffs and one named Additional Plaintiff, all of whom are individuals who allegedly bought Vaxart stock during the Class Period. The complaint names eight individual defendants, all present or former directors officers of Vaxart and five of whom are connected to Armistice Capital or Armistice’s insiders in some fashion. The complaint also names Vaxtart and two Armistice entities (Armistice Capital, LLC and Armistice Capital Master Fund Ltd.) as defendants.

The complaint alleges numerous instances of misleading disclosures followed quickly by Armistice Capital sales of Vaxart stock. The class period runs from June 15, 2020 to August 19, 2020 inclusive, and includes a subclass (under Section 20A) of the Securities Exchange Act comprised of those “who purchased or otherwise acquired Vaxart securities contemporaneously with Defendants Armistice, Boyd and Maher’s sales of Vaxart securities on or about June 26 and 29, 2020.”

Court documents state that Vaxart, and all the individual defendants except two, have entered into a partial settlement for $12,015,000. A hearing for approval of the settlement is scheduled for January 12, 2023. If the settlement is approved, only the claims against Armistice Capital, LLC and two individual defendants: Steven Boyd and Keith Maher will remain.

In short, the partial settlement contemplates that the litigation will only survive against the controlling hedge fund, Armistice Capital, and two Armistice insiders.

Dovetailing with the dates of the subclass is the allegation that on June 26, 2020 “Defendants delivered the master stroke of their carefully calculated deception to create the pop in the stock pice they expected. Specifically, the Armistice Defendants caused Vaxart to issue a press release headlined: ‘Vaxart’s COVID-19 Vaccine Selected for the U.S. Government’s  Operation Warp Speed.” Plaintiffs further allege that “The press release also noted that Vaxart ‘has been selected to participate in a non-human primate (NHP) challenge study, organized and funded by Operation Warp Speed’ — language that was plainly calculated to give the Defendants at least some basis to later claim that they had adequately disclosed their ‘selection’ was only for the NHP study.”

The complaint alleges five causes of action, all under the Securities Exchange Act: two under Section 10(b) and Rule 10(b)-5; two under section 20(a) (controlling person liability); and one under Section 20(A).

Lead counsel for the class is Hagens Berman Sobol Shapiro LLP .Counsel for Vaxart and its related individuals is Thompson Hine LLP. Counsel for Armistice Capital and Boyd and Maher is Akin Gump Strauss Hauer & Feld LLP.