Oct 14 Reuters - The Delaware Chancery Court in this week ruled that an activist investor's attempt to seize control of Biotechnology company CytoDyn's board is invalid, marking a rare rebuke from a court that hears disputes over mergers and governance matters.
The court ruled that the activist group who owns less than 1% of CytoDyn's stock failed to comply with the firm's bylaws and left out key information on a conflict of interest. These omissions in turn left their Nomination Notice terminally incomplete, the ruling said, dated October 13.
The activist group, led by Paul Rosenbaum, wrote on 30 June to the company, which is working on coronavirus treatments, to say it planned to nominate five directors to the six-member board of the company. They say the board presided over a sharp share price drop and enabled operational failures.
We believe strongly that the Court's decision is fundamentally flawed and therefore evaluating all possible alternatives, the group said.
The company rejected the group notice letter, saying it failed to comply with company bylaws and was riddled with errors ranging from mistakes in the nominee standard questionnaires to failing to correctly disclose the group's funding.
The company is represented by law firms Sidley Austin LLP and Potter Anderson Corroon LLP, while the activists are represented by Greenberg Traurig LLP and Baker Botts LLP.
The matter moved to the courts after the company rejected the nomination.
Where plaintiffs eventually went wrong here is by playing high and loose with their responses to key inquiries embedded in the advance notice bylaw, the ruling said.
This is the first time a Delaware court has been asked to rule on a shareholder who submitting a notice that was not required to supply information mandated by the company's bylaws.
The company is valued at approximately $ 1 billion and its stock price fell 13.7% to $1.36 on Thursday.