On Thursday a class action complaint was filed in the Southern District of California by investors who were shareholders as of February 3, 2021, in the defendant company G.W. Pharmaceuticals LLC. The lawsuit, which alleged the company provided misleading information to shareholders, also proceeded against various members of the company’s board of directors.
GW Pharmaceuticals is a manufacturer of cannabinoid pharmaceuticals for use in the treatment of specific childhood seizure syndromes. Jazz Pharmaceuticals PLC, the other party in a proposed merger, focuses on medications regarding neurological disorders and cancers.
On February 3, GW reportedly entered into an agreement and plan of merger with Jazz Pharmaceuticals PLC. The merger plan had holders of GW ordinary shares receiving $16.66 in cash plus an amount of Jazz ordinary shares equal to an exchange ratio that would be calculated based upon Jazz’s share price, and holders of GW American Depositary Shares (“GW ADSs”) receiving approximately $200 per share in cash and $20 in Jazz stock in consideration for their share.
Accompanying this proposed merger plan was a prospectus regarding GW’s future prospects absent this merger, which the plaintiffs allege was materially false and deceptive and showed a bleaker future than was warranted to induce the shareholder to approve of a merger offer that undervalued their shares in accordance with the future value of the merged company. Specifically, the plaintiffs noted that the December projections represented a 15% drop in the projected earnings without any changes in the market composition or appetite for the product that was present in the July projections.
The plaintiffs are suing for violations of Section 14(a) and Section 20(a) of the Exchange Act. They are represented by the Monteverde Law Firm. No counsel has been entered for defendants to date.