On Friday in the Southern District of New York, an individual filed a complaint against Seneca Biopharma Inc. (Seneca), individual members of Seneca’s Board of Directors, Townsgate Acquisition Sub 1 Inc. (Merger Sub), and Leading BioSciences Inc. (LBS), alleging that the defendants’ registration statement proposing a merger omitted material information, rendering the registration statement “false and misleading,” in violation of the Securities Exchange Act of 1934.
On. Dec. 16, 2020, Seneca’s board — including the individual defendants, Seneca board Chairman Kenneth C. Carter and board members Cristina Csimma, Mary Ann Gray, David Mazzo, and Binxian Wei — entered Seneca into an agreement with Merger Sub and LBS, merging Merger Sub with LBS, which survives as a wholly owned subsidiary of Seneca, and converting all shares of LBS common stock into Seneca common stock shares, the complaint said.
Plaintiff Hesam Pirjamaat, an owner of Seneca common stock, claims that the registration statement with the U.S. Securities and Exchange Commission (SEC) leaves out Seneca’s and LBS’s financial projections — which is material information “because it provides stockholders with a basis to project the future financial performance of a company, and allow stockholders to better understand the financial analyses performed by the company’s financial advisor,” about which material information also is left out, according to the complaint. Undisclosed in the registration statement are “individual multiples and metrics for the companies observed in the analysis” by Seneca’s financial advisor, Cassel Salpeter & Co. LLC, among other purported material information, the complaint said. The plaintiff also claims material information omission regarding Seneca’s other financial advisors, Hibiscus Bioventures and Solebury Capital LLC, such as the financial advisors’ compensation received in connection with these actions.
Also alleged is that the registration statement omits material information “regarding the process leading up to the execution of the Merger Agreement,” such as that concerning the nondisclosure agreements brought by Seneca and “the terms and values of the proposals and indications of interest submitted,” the complaint said.
“The above-referenced omitted information, if disclosed, would significantly alter the total mix of information available to the Company’s stockholders,” the plaintiff proffered. “The omissions and false and misleading statements in the Registration Statement are material in that a reasonable stockholder will consider them important in deciding how to vote on the Proposed Transaction.”
The plaintiff argued that the individual defendants were “at least negligent” in their filing of the registration statement because it was “their duty to disclose” the information omitted in the statement because they were directly involved in the daily operations of Seneca and consequently had the influence and ability to disclose such information.
The plaintiff requested an order to bar the proposed transaction from proceeding if it continues without a new registration statement; a new registration statement that includes the alleged previously undisclosed information; and reasonable and just relief.
The plaintiff is represented by Rigrodsky & Long PA.