G. Hudson

Long/short equity
G. Hudson
Long/short equity
Contributor since: 2012
Company: Save 15% OFF all SKLZ brand of sports training equipment
Sorry the above case is a different case but Seeking Alpha wouldn't allow me to delete.
"Plaintiffs WaveDivision Holdings, LLC, and Michigan Broadband, LLC have sued several investment funds and investment fund management companies for allegedly sabotaging its contract to purchase assets from Millennium Digital Media Systems, LLC. They assert claims against defendants for tortious interference with contractual relations, civil conspiracy and aiding and abetting tortious conduct. "
NOTE: This is a non-contractual relationship - defendants were third party investment funds who committed tortious interference with a contractual relationship
YOUR COMMENT: The chances of PIP being only awarded less than a million I think it extremely low as this is no penalty. Were they to award this amount then no company in Delaware would ever worry about negotiating in bad faith ever again under these circumstances. "
MY THOUGHTS: Maybe it would be a s way to remind attorneys that when they are putting together a contract- they should include a way to calculate an actual damage award. In my opinion, PharmAthene's attorneys made the mistake of failing to protect them. SIGA made the mistake of not finding other ways to finance them through tough times. So both company's made mistakes.
The main benefit of the long wait is that it basically eliminates the likelihood of VC Parsons involvement since he is supposed to retire on October 22nd. For SIGA supporters this is major. For PharmAthene supporters- If this case is overturned and remanded as I believe it will be, VC Parsons hasn't done either company a favor with his damage awards.
This just in oral hearing set on Wednesday October 7, 2015 at 11AM for PharmAthene vs. SIGA - http://1.usa.gov/1J16ogH
Though I strongly believe SIGA will win this battle and PharmAthene's stock will take a major hit, I believe a strategy of buying both stocks will actually make an investor a nice return especially since we know that VC Parsons is retiring. Of course, if you pick the winner in this battle, you will definitely have a fantastic return because both stocks are priced as if they both will lose this legal battle.
Jeff-
Interesting article- I still believe Parsons' latest ruling will be overturned by the Delaware SC and they will do a better job of giving Chancellor Parsons guidance as to what his options are- "reliance damages" probably around $600,000 or possibly an "unjust enrichment" award which would not be significantly more than the reliance damage award
.
Prior to Parsons' ruling, I don't remember any articles by you that actually believed that a lump sum expectation damage was even possible so I don't know how you can get to believing the SC will uphold the award. I believe the delay from a 60 to an almost 90 day turnaround bodes well for SIGA shareholders since if this case was going to be affirmed, we probably would already have a ruling by now so I would be careful jumping into PIP's stock even though it has come down. There may be a reason for that.
How expensive is Encapso per MT as compared to what is currently being used and what is the price of a MT of Encapso?
Pure fiction without any substance but good luck with your fantasy.
I talked with the clirk of the Supreme Court and she indicated SIGA had filed their opening brief on March 2nd.
Excerpts from PharmAthene's 2014 press release:
http://bit.ly/1b4DUX1
"At December 31, 2014, PharmAthene had cash and cash equivalents totaling approximately $18.6 million, compared to $10.5 million at December 31, 2013."
"The increase in cash in 2014 resulted from net proceeds of approximately $18.1 million raised through the sale of the Company's common stock under a Controlled Equity Offering Agreement, and $0.7 million in warrant exercises, partially offset by $8.5 million in net cash used in operations and $2.1 million used for other financing activities."
"For the year ended December 31, 2014, PharmAthene's net loss was approximately $10.0 million, or $0.17 per share, compared to a net loss of $11.7 million, or $0.23 per share, for the prior year."

"The Company expects its cost-saving initiatives will preserve cash and cash equivalents sufficient to finance its operations beyond the adjudication of the appeal of the decision of the Delaware Chancery Court awarding PharmAthene $195 million plus post-judgment interest."

HERE IS WHY THIS LAST EXCERPT IS MISREPRESENTING THE TRUTH-
1) At December 31, 2014, PharmAthene had $18.6 million in cash & cash equivalents,
2) For the full year of 2014 PIP only had a $10.0 million net loss WITH ONLY $8.0 million of that loss as net cash used in operations IN A YEAR THAT THEY WERE FULLY OPERATING WITHOUT CUTBACKS
SOOOOOO- The $18.6 million in cash at 12/31/14 is sufficient to cover ALL cash operation needs for TWO YEARS even if they continued to operate WITHOUT LAYING ANYONE OFF!!!!!
FACTS-
1) The SC will rule on this case within the next few months
2) If PharmAthene wins - SIGA has over a $100 million in cash that will be immediately be available to PIP plus the rights to millions of more cash from future BARDA payments
MY BELIEF- I still own both stocks though I sold off over half of my PIP shares after this announcement- PharmAthene knows they have a slim chance of winning this battle before the SC so they are making sure they have enough money to have- "sufficient to finance its operations beyond the adjudication of the appeal of the decision of the Delaware Chancery Court"
So you think the SC is either going to string this out or overrule the damage award????
#1 The SC is going to rule soon (within months) so that can't be the reason can it - hmmmmm
Otherwise the SC has to rule on this case soon (probably within the next few months) so if they were to rule in favor of PharmAthene then SIGA would have to either pay PIP the award or turn control over to PharmAthene - if that is what PIP's management believes then no reason for massive layoffs & the president stepping down - right???
Does this sound like a company that is confident they will receive a $200+ million dollar award? -> From PharmAthene's 2014 financial results transcript-
http://bit.ly/1Monkgd
"In connection with the realignment plan, PharmAthene plans to reduce its staffing levels by approximately two thirds. Eric Richman, President and Chief Executive Officer, will remain a member of the Board of Directors, but will no longer serve as an Officer of the Company after March 11, 2015. He will continue to play a key role in managing the ongoing litigation, other legal matters and strategic transactions in his role as Director. Linda Chang will continue to serve as Chief Financial Officer through April 30, 2015. In accordance with meeting cost-saving objectives, the Board will be reduced from eight members to six and Messrs. Joel McCleary and Brian A. Markison intend to resign from the Board."
Good post. The stock market has little to do with the actual valuation of a stock- the value of a stock is run up beyond its true worth when the major players get behind it and down below its true worth when they need to drive it the other way.
I wonder how much of the Lumber Liquidators was about driving the stock down as a result of the people behind the story versus the real truth. I can't say myself but it wouldn't surprise me if the shorts made it up using their version of the story which used some borderline research to support their lie.
Your comment: "However, if the judge can use the BARDA contract then the ruling is fair to SIGA and should end this matter."
My comment: That's a big IF
I still believe this time Judge Parsons will be even more boxed in by the SC and he will be forced to award reliance damages only- $200,000 to $300,000.
NOTE: I own both companies - (significantly more shares of SIGA) - If PIP wins - I should at least break even on the investment as to where the stocks are currently trading - IF SIGA wins- I'll hit a homerun and be up significantly
Peqod,
So if it was so obvious that SIGA was going to earn profits, why did Judge Parsons rule that it would be to speculative to award "expectation damages" in his September 22, 2011 Opinion (almost 5 years after the dispute occurred)-
http://bit.ly/1Fxxjxf
Judge Parsons September 22, 2011 Opinion
(Page 80)
"This case presents a particularly vexing question as to the difference between damages that are speculative and those that merely lack mathematical precision. On the one hand, even a consummated license agreement between PharmAthene and SIGA in accordance with the LATS still would subject PharmAthene to the possibility that it might not profit at all for a host of reasons. For example, ST-246 might never receive FDA approval, there are no guaranteed purchasers of ST-246, and research delays or problems in animal trials might prevent ST-246 from reaching a viable market in a timely fashion. Because under even a fully-consummated license agreement there would be a plausible chance that PharmAthene would make no profit, PharmAthene’s claimed expectation damages could be considered, in a literal sense, to be merely speculative."
(Page 84)
"Applying these precedents to the facts before me, I conclude that I cannot award PharmAthene the present value of its estimated lost profits on a license agreement that (1)"
(Continued on Page 85)
"would have contained the risk of receiving no profits and (2) was never consummated, because such an award would be speculative. Nevertheless, it is possible that, in an appropriate case, permissible expectation damages for breach of an agreement to negotiate in good faith may include the net present value of whatever the parties had, or in good faith demonstrably would have, agreed to exchange at the time that the breach occurred."
MY COMMENT- So apparently you think that anyone fighting over expectation damages can wait almost 8 years to get a decision as to whether there are profits available to estimate an expectation damage award. It would seem kind of obvious that this is not the intent of the law. Time will tell and I look forward to the SC's ruling.
earljr1-
Expectation damages must be calculated based on the information available at the point of the initial dispute- December 2006. On rare occasions, additional information after the filing of a court dispute has been allowed to be used (usually within a few months - not 7 years later).
So if you read Judge Parson's ruling, he openly admits that he can't use current information because it was not knowable at the time of the dispute.
A lot of people on this board are making judgments about when & how expectation damages can be awarded without understanding the limitations of awarding them.
I agree this is a circular argument and in the very near future you will finally be able to figure out that I am right. Keep on believing how you think the SC ruled but time is on my side.
Foot note #99 gives examples of when expectation damages can be awarded- NOT that they are guaranteed for ALL type II cases -->
(“It is well settled law that ‘a recovery for lost profits will be allowed only if their loss is capable of being proved, with a reasonable degree of certainty. No recovery can be had for loss of profits which are determined to be uncertain, contingent, conjectural, or speculative.’”)
Soooooo-> If the Delaware SC determines the award is uncertain, conjectural and/or speculative - THEN THERE IS NO RECOVERY FOR LOST PROFITS!! ------> AWARD OVERTURNED & REMANDED BACK TO PARSONS
Pequod stated- "I would not buy a company's stock just because someone has accumulated a ton of shares like that."
I bet you are really glad that you didn't follow Warren Buffet by investing in his stocks too
wedge7- You conveniently omitted note #99 which explains the qualifications for awarding expectation damages-
"99 An expectation damages award presupposes that the plaintiff can prove damages with reasonable certainty. Callahan v. Rafail, 2001 WL 283012, at *1 (Del. Super. Mar. 16, 2001) (citation omitted) (“It is well settled law that ‘a recovery for lost profits will be allowed only if their loss is capable of being proved, with a reasonable degree of certainty. No recovery can be had for loss of profits which are determined to be uncertain, contingent, conjectural, or speculative.’”)."
So anyone analyzing how Judge Parsons determined his $195 million damage award will see that he selectively picked and chose information without any real basis for it to come up with this award and even randomly selected 2010 as the first year he was reasonably certain shipments of ST-246 would have begun. When you look up the meaning of uncertain-conjectural & speculative -> you will find Judge Parsons' picture awarding PharmAthene $195 million of expectation damages
I am sure he doesn't bat 100% but I am sure he didn't accumulate $14 billion by making bad bets and being afraid to admit when he was in a bad investment.
1st- SIGA already has $110 million on their balance sheet with minimal debt-
"The wonderful thing for shareholders is that SIGA only has $2.5 million in debt outstanding, consisting primarily of a term loan from GE Capital. Normally, a creditor has the ability to accelerate the repayment of the term loan now that SIGA is in bankruptcy. Surprisingly, GE Capital has decided not to accelerate the repayment of the term loan as long as:
SIGA continues to make its regular interest and amortization payments
SIGA creates an account to hold a minimum of $4 million as collateral
Both of these should be extremely easy for SIGA to do, considering it has $110 million of cash on hand."
2nd- Plus they still have $162 million cash to collect from their current BARDA contract
" + $162 million remaining from the BARDA contract"
3rd- SIGA still has a lot of opportunities for ST-246 with BARDA plus many opportunities internationally for that drug. They also have some other drugs in the pipeline that could end up creating a cash stream or large payout
FINALLY- So it should be obvious that even if they are short cash on their balance sheet in the remote case this $195 million award holds up, they will only have to temporarily fund $0 to $95 million until more cash rolls. Ron Perelman probably has that amount of change on his bedroom dresser.
CONCLUSION: SIGA will survive any result from PharmAthene's lawsuit and will control the future sales of ST-246 which still have significant potential in a world where there are so many threats and dangers.
Johns Research- Your comment->"At this stage, I see little hope for either of those events. Investors who have bid this stock to over $2 per share need to understand that their entire investment could quite possibly be wiped out."
So you think you are smarter than the Ronald Perelman and his team of investment advisors who continued to buy shares of SIGA AFTER the bankruptcy was files (excerpt below from above post)-
MacAndrews & Forbes Holdings Inc. (Ronald Perelman’s company owns 25% of SIGA and continued to buy SIGA shares after bankruptcy filing)

(see below purchases of 403,884 shares of SIGA after bankruptcy filing) Does anyone believe Ronald Perelman http://bit.ly/1IT58z1 “worth 14 BILLION dollars -26th richest American” who owns 25% of SIGA’s stock would be dumb enough to continue buying SIGA stock if he thought there was any way SIGA would end up bankrupt.)
My comment: All of my research points to Perelman's company being right on - $195 million is chump change for him and he is not going to let SIGA go bankrupt even if he has to lend some money to SIGA
So you believe Chancellor Parsons can just come up with any method to calculate a damage award and a defendant has to just accept it and the Delaware Supreme Court has no say???????
William J. Haynes II, SIGA's General Counsel, commented, "We believe the decision to award expectation damages is not supported by law with the amount of the award being completely speculative, conjectural and arbitrary. We are confident in the strength of our grounds for appeal, and will ask the Supreme Court of Delaware to overturn this judgment." ---> LINK-> http://bit.ly/16XE1kO
Anyone who understands the case law for determining an expectation damage award knows that Judge Parsons has exceeded his authority and HIS AWARD WILL BE OVERTURNED = Reliance damages of $200,000 to $300,000 is the proper award.
Edge of the Street,
Thanks for the well written article. I was planning on writing a similar article but didn't find the time. Also, even though I own both SIGA & PIP stock (significantly less PIP), I am still very confident that the Delaware Supreme Court will throw out Judge Parsons award and that PharmAthene's damage award will be limited to an amount that approximates a reliance damage award -> between $200,000 to $300,000.
Obviously as you have pointed out in your article, the upside for this stock, if the $195 million award is thrown out, is fantastic while the downside is minimal. For anyone interested in reading my articles supporting a reliance damage award, here are some links-
http://seekingalpha.co...
http://seekingalpha.co...
http://seekingalpha.co...
http://seekingalpha.co...
http://seekingalpha.co...
http://seekingalpha.co...
MacAndrews & Forbes Holdings Inc. (Ronald Perelman’s company owns 25% of SIGA and continued to buy SIGA shares after bankruptcy filing)
(see below purchases of 403,884 shares of SIGA after bankruptcy filing) Does anyone believe Ronald Perelman http://bit.ly/1IT58z1 “worth 14 BILLION dollars -26th richest American” who owns 25% of SIGA’s stock would be dumb enough to continue buying SIGA stock if he thought there was any way SIGA would end up bankrupt.)
9/23/14 bought 151,158 shares of SIGA @ $1.3286
(http://bit.ly/1IT58Pj )
9/24/14 bought 52,999 shares of SIGA @ $1.3569
(http://bit.ly/1IT58Pp )
11/6/14 bought 70,000 shares of SIGA @ $1.4601
11/7/14 bought 129,727 shares of SIGA @ $1.5179
Another reason the appeal won't swiftly be rejected is -> I called the Supreme Court clerk - SIGA hasn't even filed their brief yet and has until March 2nd to file it. PharmAthene will have to wait until SIGA's brief is filed to try to have the case thrown out.
Judge Parsons hasn't released his final judgment yet. However since SIGA has calculated that amount and believe it could potentially be the correct amount, they have included in their financial statements. This doesn't mean Parsons won't come up with a different amount- I believe PharmAthene thinks the award should be closer to $240 million. However even though SIGA has based their financial statements on the above award, it doesn't stop them from having the award overruled by the Delaware Supreme Court.
NOTE: SIGA's management still believes a reliance damage award is the correct award.
I believe VC Parsons current memorandum opinion is fantasy land and will be overturned by the SC. I was the only one stating that the SC ruling required VC Parsons to choose between a lump sum distribution of either expectation damages and reliance damages. I don't expect that I will waste a lot of time debating this since I am confident the SC will over turn and remand this back to VC Parsons wasting both PharmAthene's and SIGA's money. Since I try to avoid getting emotionally involved with owning a stock, I will play this to make the best return out of the present situation.
Reminder about "Memorandum Opinions"-
"Memorandum opinions are often issued in areas of well-settled law or where a particular set of facts may create imprudent case law."
I think we can all agree that VC Parsons' memorandum opinion IS NOT AN AREA OF WELL-SETTLED LAW.
Memorandum Opinion- http://bit.ly/1mCw3yQ
"Under United States legal practice, a memorandum opinion is usually unpublished and cannot be cited as precedent. It's formally defined as: "[a] unanimous appellate opinion that succinctly states the decision of the court; an opinion that briefly reports the court's conclusion, usu. without elaboration because the decision follows a well-established legal principle or does not relate to any point of law."
MY THOUGHT: VC Parsons' ***memorandum*** opinion definitely does not relate to any point of law. As I indicated in my articles- the SC limited Judge Parsons to a lump sum expectation damage or reliance damage award. I believe this memorandum opinion, if it becomes a final opinion by VC Parsons, will be overturned by the SC. I don't plan on wasting a lot of my time debating this fantasy opinion by VC Parsons.
Jeff,
I won't go there but "non sequiturs" isn't necessarily my favorite comment.
I know Judge Parsons has spent every day trying to figure out how to award PharmAthene a large damage award but you have to wonder as time passes (This case filed in December of 2006, after many hours of hearings & research, he settled for promissory estoppel as the basis for his September 2011 damage award and now 3 years later, he is having to take all this time to come up with a ruling???) if he is having trouble finding a basis for that award which will hold up to a SC appeal.