Class Action Suit Against Pacific Edge

[iluab]

In 2014 CEO of Pacific Edge David Darling, along with other Directors, sold down their holdings at circa $1.60, at the peak in the share price, this came after a period of providing schedule guidance and advice to the market which the market, in good faith and with an expectation of honesty and capability, had priced in.

Subsequently, the share price has dropped to where it is today as very few of those commercial schedule targets were met, two years later many are still not met. One can choose whether this gross lapse in performance was due to negligence, naivety, misrepresentation, or just down right manipulation of NZX investors in an effort to secure capital.

Either way, I think there is a case to be answered here, a lot of investors have lost a lot of their hard earned cash invested in PEB over the last couple of years due to this matter, and as I believe a matter beyond just general stock investment risk.

Should PEB be held to account with a class action suit ?

[Meister]

Previous holder, bought at 60c just before the hype went nuts and sadly held on far too long and lost the hype related gains.
I also have no idea on the legal issues here so might be way off.

I am not quite sure of the grounds for any suit action here. Can't really fault the directors for selling when it was ridiculously overpriced. Many rational investors were also selling at that point because for those not caught up in the hype, it was obviously overpriced. It isn't the director's fault the company got madly hyped up, and its hard for the directors to come out and say "Guys, the shareprice is 3x too high, lets take it back a bit". Do companies ever make announcements like that?

Off the top of my head the possible evidence for any suit would be:
- the tens of thousands of tests comment.
- no more capital raisings required comment.
- "everything just around the corner" type announcements.

I could be missing a lot, what else?

They did make a lot of positive announcements, but were they wrong? I think the announcements were not wrong or intentionally misleading - they were positive, but were hyped up by investors far beyond what they really should have meant for the company. The company was certainly not correct on some of the timeframes, like CMS approval, but it might be a stretch to say they were misleading investors, its highly possible that they were just wrong and naive.

I think a lot of it would come down to the 'tens of thousands of tests' comment being what was actually spoken directly by the company and not a mistranslation or mistake by the reporter, unless the company was required to notice the mistake immediately and correct it. From what I remember certain people did question the company and the company responded that the quote was not correct. I have no idea if they tried to change the news article, or if they are legally obligated to. Would appreciate somebody else's opinion on that one.

Overall it seems more a case of bad leadership and a lack of understanding of the length of the commercialisation process, and how long things take. I am disappointed by the company for sure for all the missed targets, and disappointed in myself for holding on so long (lesson learned), but I am not sure about misrepresentation or intentional misleading of investors. Can a class action suit be filed simply for the directors being inept/clueless? Keen to hear others opinions.

[Bjauck]

It is always informative to follow whether and how many insiders are buying or selling large numbers of their shares even where there may have been full compliance and the insiders are just taking advantage of general market conditions and/or a SP that they think has got away with itself or has become overly cheap.

[bottomfeeder]

Directors and Staff that actually buy their shares on market should be allowed to sell at any time. Those that were issued shares either as a bonus, or at a price to be paid at some time in the future should not be allowed to sell. Someone suggested a lead time to sell by making a market notification. Really a major conflict of interest, making announcements that affect a share price and being in the market to profit from it.

[Bjauck]

PEB has been in trouble with the FMA before - for slow disclosure
See: https://www.nbr.co.nz/article/fma-slams-pacific-edge-th-173251

[Beagle]

Previous holder, bought at 60c just before the hype went nuts and sadly held on far too long and lost the hype related gains.
I also have no idea on the legal issues here so might be way off.

I am not quite sure of the grounds for any suit action here. Can't really fault the directors for selling when it was ridiculously overpriced. Many rational investors were also selling at that point because for those not caught up in the hype, it was obviously overpriced. It isn't the director's fault the company got madly hyped up, and its hard for the directors to come out and say "Guys, the shareprice is 3x too high, lets take it back a bit". Do companies ever make announcements like that?

Off the top of my head the possible evidence for any suit would be:
- the tens of thousands of tests comment.
- no more capital raisings required comment.
- "everything just around the corner" type announcements.

I could be missing a lot, what else?

They did make a lot of positive announcements, but were they wrong? I think the announcements were not wrong or intentionally misleading - they were positive, but were hyped up by investors far beyond what they really should have meant for the company. The company was certainly not correct on some of the timeframes, like CMS approval, but it might be a stretch to say they were misleading investors, its highly possible that they were just wrong and naive.

I think a lot of it would come down to the 'tens of thousands of tests' comment being what was actually spoken directly by the company and not a mistranslation or mistake by the reporter, unless the company was required to notice the mistake immediately and correct it. From what I remember certain people did question the company and the company responded that the quote was not correct. I have no idea if they tried to change the news article, or if they are legally obligated to. Would appreciate somebody else's opinion on that one.

Overall it seems more a case of bad leadership and a lack of understanding of the length of the commercialisation process, and how long things take. I am disappointed by the company for sure for all the missed targets, and disappointed in myself for holding on so long (lesson learned), but I am not sure about misrepresentation or intentional misleading of investors. Can a class action suit be filed simply for the directors being inept/clueless? Keen to hear others opinions.

Good post. The merits of any action have to be viewed in the context of this being a biotech company and the costs involved.

[simla]

a lack of understanding of the length of the commercialisation process
Good on you for standing up for these guys, Meister. Do others mean a lack of understanding of the length of the process by the shareholders by any chance? There is a trend growing on this site to blame management for everything and shareholders for nothing, which I do not think is fair. Further, shareholders seem willing to put money into startups but then to take offence when it turns out that startups involve risk. Really?

I personally think a class action is quite absurd as the management have clearly (to me) been doing their best throughout. Further, and unlike many recent posters on this site apparently, it seems to me that they are actually doing a GOOD job with a challenging proposition. The PEB proposition was always clear from the start : they needed acceptance in the US. They seem to me to have been pursuing that diligently. The difficulty has always been quite apparent from the start : getting the existing people to want to change which is always difficult. (discl: I own no shares as this has never been my sort of investment.)

As I've said before, I think suing of Boards is very counter-productive for shareholders. You might win in the short term but in the end you lose out on many future opportunities. Over at BLT we just can't get them to tell us about anything, and I think it is very likely that they have just concluded that telling people anything just lays you open to law suits these days. I hope someone soon publishes a law that reasonable endeavour is a complete defence. Presumably the WYN case will discuss that, assuming it comes to pass.

You can see the same thing in Wellington now. They are closing buildings because of perceived health and safety law liability rather than because of any serious probability of harm. Law should be a protection against excess, but using it to sue people for not achieving perfection is where you get increasingly bad society instead.

[blobbles]

Agree, a lawsuit against PEB is quite absurd. They haven't misled investors, maybe been over confident, but I don't believe they have misled.

WYN on the other hand... they recognised revenue before it was possible. Any experienced CEO/CFO/board member should have called that out as not possible and should never have been done. That should be construed as professional incompetence in the least, but the suit is going for intentional misleading, I believe. Then they dug themselves into bigger and bigger holes by releasing inaccurate assessments over and over again regarding being cash positive. At the time of the last capital raise it should have been made clear that WYN were in dire straits and that it wasn't so much a capital raise but a bail out - with a promise from management to improve their cash management performance (which they subsequently failed at AGAIN). A much better case against WYN management.

[skid]

Good on you for standing up for these guys, Meister. Do others mean a lack of understanding of the length of the process by the shareholders by any chance? There is a trend growing on this site to blame management for everything and shareholders for nothing, which I do not think is fair. Further, shareholders seem willing to put money into startups but then to take offence when it turns out that startups involve risk. Really?

I personally think a class action is quite absurd as the management have clearly (to me) been doing their best throughout. Further, and unlike many recent posters on this site apparently, it seems to me that they are actually doing a GOOD job with a challenging proposition. The PEB proposition was always clear from the start : they needed acceptance in the US. They seem to me to have been pursuing that diligently. The difficulty has always been quite apparent from the start : getting the existing people to want to change which is always difficult. (discl: I own no shares as this has never been my sort of investment.)

As I've said before, I think suing of Boards is very counter-productive for shareholders. You might win in the short term but in the end you lose out on many future opportunities. Over at BLT we just can't get them to tell us about anything, and I think it is very likely that they have just concluded that telling people anything just lays you open to law suits these days. I hope someone soon publishes a law that reasonable endeavour is a complete defence. Presumably the WYN case will discuss that, assuming it comes to pass.

You can see the same thing in Wellington now. They are closing buildings because of perceived health and safety law liability rather than because of any serious probability of harm. Law should be a protection against excess, but using it to sue people for not achieving perfection is where you get increasingly bad society instead.

I agree ..a suit would never get traction-(look at all the other companies that have directors selling) But some changes to the rules would go a long way..However..I think both management and Share holders are partly to blame.
I think its fair to say management has misled to a certain extent with their statements(especially the 100,000s of tests). If you put managements selling in that context its starts smelling a bit off. Of course its shareholders responsibility to educate themselves enough to not get taken for a ride --One example would have been to get out after the managements selling (at the very least it signals that nothing is just around the corner (short term)--Probably both management and share holders are a bit guilty of being naive in some areas.

It would be a bit of a stretch to accuse management of outright malintent in most cases--but being ill prepared and possibly not up to the task is fair game in my book (and believe me alluding to the latter is enough to cop some real flak):(

[bottomfeeder]

Any trade by Directors or Employees must be considered as insider trading and proved to be otherwise, rather than the other way around.

[black knat]

Much of the harshest criticism of this company on sharetrader was around the "tens of thousands of tests" comment. That comment had featured a lot in discussions on the company's prospects on this forum - but I am not sure if it was discussed much more widely than that. I think I expressed the view at the time that this reported statement was not the sort of thing that that investors should be relying on. It was not an official company position, indeed it was at odds with what he company was saying. When asked about it they disavowed it.

I was a shareholder but sold out when the first of the CMS reports came out and it was quite clear there was a very long process ahead of the company to gain approval. I think the company did underestimate/ misunderstand what was involved in this process. They were also overly optimistic about the the time it would take to commercialize. However all the statements about revenue generation were always heavily caveated. I cant see how anything they have done could provide a basis for a lawsuit.

[skid]

Any trade by Directors or Employees must be considered as insider trading and proved to be otherwise, rather than the other way around.

That may how it should be ,but I dont think thats how it is ,as long as they do the necessary requirements in terms of notices etc.

meanwhile PEB posters are going to ''spit the dummy'', with this thread making the rounds :)

[Beagle]

Agree, a lawsuit against PEB is quite absurd. They haven't misled investors, maybe been over confident, but I don't believe they have misled.

WYN on the other hand... they recognised revenue before it was possible. Any experienced CEO/CFO/board member should have called that out as not possible and should never have been done. That should be construed as professional incompetence in the least, but the suit is going for intentional misleading, I believe. Then they dug themselves into bigger and bigger holes by releasing inaccurate assessments over and over again regarding being cash positive. At the time of the last capital raise it should have been made clear that WYN were in dire straits and that it wasn't so much a capital raise but a bail out - with a promise from management to improve their cash management performance (which they subsequently failed at AGAIN). A much better case against WYN management.

Agree with that in particular in respect of statements regarding sufficient reserves to last the next 12 months. Negligence anyone ?