Pharmaceutical Company Sued Over Exchange Act Violation Following Merger Announcement

Acasti Pharma, Inc. recently announced their intent to merge with Grace Therapeutics, Inc. (Grace). The announcement prompted Cameron Weir to file a lawsuit against both Acasti and its Board of Directors citing claims that the merger’s accompanying prospectus omitted critical information and violated federal securities laws. The complaint, filed last Friday in the Eastern District of New York, demands a trial by jury.

Acasti announced the merger on May 7, 2021. Acasti is set to acquire Grace, and Grace will merge as “a new wholly owned subsidiary of Acasti.” Those who hold stock in Grace will receive Acasti common shares in an amount determined by an exchange ratio formula. The term proposed a merger in which Acasti stockholders would own 55% of the company and Grace stockholders would own 45% of the company.

Weir alleged that both Acasti and its Board of Directors violated numerous sections of the Securities Exchange Act of 1934 in addition to other rules maintained by the Securities and Exchange Commission (SEC). He explained that the prospectus given regarding the merger omits and misrepresents important information. It reportedly does not contain financial projections for either company or the combined company and disregards potential conflicts of interest and the sales process prior to the announcement of the merger.

The complaint explained that absent any further information, shareholders will be forced to vote on the proposed transaction without adequate context to make an informed decision. If some of the missing information were to be disclosed, the plaintiff contended that it would “significantly alter the total mix of information available” to shareholders.

Weir claimed that due to the lack of information or misleading statements, the shareholders do not have the necessary understanding of the merger’s background, the board of directors’ reasoning for their recommendation, and Ascati’s financial advisor’s opinion.The plaintiff explained that if these sections are not revised before the shareholder vote on August 26, 2021, they will seek to recover damages as a result of the misconduct.

Ultimately, Weir cited violations of SEC rules and violations of the Exchange Act leading him to seek an order enjoining the defendants from proceeding with the transaction until all necessary information is disclosed, rescissory damages in the event the transaction proceeds with no adjustments, declarations that the defendants have violated SEC rules and the Exchange Act, litigation fees, and any other relief deemed just by the Court.

The plaintiff is represented by Halper Sadeh.