After market close yesterday, the law firm Robbins Geller Rudman & Dowd LLP announced that it has filed yet another Class Action Suit Against Galena Biopharma (NASDAQ:GALE). I know from the comments on my last article that some individuals are spreading false rumors that no lawsuits exist, or that these lawsuits are frivolous in nature, etc.
Besides providing hyperlinks that state the facts in black and white, I am unsure what else one can do to rebut these ridiculous claims. And this recent filing is further proof that some individuals are purposely seeking to mislead investors about the true nature of what is transpiring. Why they are adamant about disseminating misinformation is another matter entirely.
My chief concern, however, is that some investors believe these falsehoods, and are therefore failing to recognize how explosive this situation has become.
Based on the new complaint, Galena has allegedly "filed false and misleading statements in SEC filings and press releases". That statement clearly raises the legal stakes, showing how important it is for investors to read this new filing carefully.
Here are some highlights (or lowlights):
The complaint leads off with the following:
"These claims are asserted against Galena and certain of its officers and/or directors who made materially false and misleading statements during the Class Period in press releases and filings with the SEC."
It then goes on to state that, "…defendants violated Federal Securities Laws by disseminating false and misleading statements to the investing public."
The complaint later goes on to allege that these false SEC filings and press releases caused Galena's share price to rise while insiders sold. Cutting to the chase, the complaint alleges that insiders schemed to commit fraud against their shareholders.
While this filing is chock full of naughty allegations and mentions the relationship between DreamTeam and Galena, the most critical issue investors need to understand is that they are being accused of violating Rule 10b-5.
If you've never heard of this rule before, here is a succinct definition from Investopedia:
"This rule is the main basis for the Securities and Exchange Commission (SEC) to investigate possible security fraud claims.
Examples of offenses that would violate rule 10b-5 would be: executives making false statements in order to drive up share prices or a company hiding huge losses or low revenues with creative accounting practices."
Without drawing any direct inferences, I believe the implications are clear.
To sum up, the civil suits are now alleging that Galena has filed misleading and materially false filings with the SEC, and these statements were meant to artificially drive up share price. I warned investors about this very scenario Monday, March 3rd, and here it is appearing in a formal legal pleading filed March 5th. At this point, no one should try to deny the seriousness of the matter, or the fact that lawsuits have been filed. The real question is, how far will this investigation go?
Looking ahead, Galena should be filing a handful of SEC documents shortly. It will be interesting to see if they have modified the wording therein to better reflect the development of NeuVax, or if they will stick by their claim that the vaccine met its primary endpoint in a Phase 2 trial. I would also pay close attention to any surprises in the Risk Factor section(s) that may provide insight into the current legal malaise.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I covered my short position because of my concern that a trading suspension is a possibility.