In a dramatic turn of events, a New York federal judge has delivered a decisive victory to hedge fund Armistice Capital LLC and its chief investment officer Stephen Boyd, striking down a derivative suit brought by a shareholder of biotechnology giant Vaxart Inc. The lawsuit, aimed at disgorging alleged short-swing profits, has been met with a resolute defense, culminating in a ruling that has sent shockwaves through financial circles.
Hedge Fund Beats Vaxart Investors ‘Short-Swing’ Profits Suit : Legal Battle Unveiled
The saga unfolded in the chambers of U.S. District Judge Jennifer L. Rochon, where she rendered her opinion and order on Wednesday, effectively extinguishing the hopes of plaintiff Andrew Roth. At the heart of the dispute lay amendments to Vaxart warrants, approved by the board and subsequently leveraged by Armistice. Roth contended that these maneuvers yielded illicit gains, amounting to millions in short-swing profits.
Exemption Invoked
In a masterstroke defense, Armistice and Boyd invoked U.S. Securities and Exchange Commission Rule 16b-3 to fend off the accusations. This rule, they argued, shields transactions where the defendant is a director of the issuer and the transaction is greenlit by the board. Judge Rochon, in her ruling, upheld this defense, citing a clear adherence to the exemption criteria.
Hedge Fund Beats Vaxart Investors ‘Short-Swing’ Profits Suit : Clashing Perspectives
However, the courtroom battle was far from one-sided. Roth persisted, contending that the exemption hinged on a crucial caveat: the issuer’s board must be cognizant of a member representing the interests of the short-swing seller. Yet, Judge Rochon rebuffed this argument, asserting that formal deputization was not a prerequisite. The reality, she maintained, was the pivotal factor.
Hedge Fund Beats Vaxart Investors ‘Short-Swing’ Profits Suit : Decisive Moments
The narrative took a riveting turn as details of the transactions emerged. Armistice, a dominant shareholder in Vaxart, seized the opportunity presented by amendments to the warrants. Following a seismic announcement regarding Vaxart’s oral COVID-19 vaccine, Armistice swiftly executed warrants and liquidated its holdings, a move contested vehemently by Roth.
Allegations and Allegiances
Roth’s accusations soared, alleging wrongful profits to the tune of $87 million, directly linked to the warrant amendments. Amidst the legal melee, representatives for both sides remained tight-lipped, refusing to provide immediate commentary.
Legal Titans Clash
In this high-stakes legal showdown, Roth was represented by a formidable legal team led by Glenn F. Ostrager and Joshua S. Broitman. Conversely, Armistice and Boyd marshaled their defense with legal luminaries from Akin Gump Strauss Hauer & Feld LLP, led by Douglas Rappaport and Kaitlin Shapiro.
