Delaware court rejects activist's attempt to control CytoDyn's board

Cytodyn

14/10/2021 18:23

By Svea Herbst-Bayliss
    Oct 14 (Reuters) - The Delaware Chancery Court this week
ruled that an activist investor's attempt to seize control of
biotechnology firm CytoDyn's  CYDY.PK  board is invalid, marking
a rare rebuke from a court that hears disputes over mergers and
governance matters.
    The court ruled that the activist group, which owns less
than 1% of CytoDyn's stock, failed to comply with the company's
bylaws and left out key information on a conflict of interest.
"These omissions, in turn, left their Nomination Notice fatally
incomplete," the ruling, dated October 13, said.
    The activist group, led by Paul Rosenbaum, wrote to the
company, which is working on coronavirus treatments, on June 30
to say it planned to nominate five directors to the company's
six-member board. They say the board enabled operational
failures and presided over a sharp share price drop.
    "We believe strongly that the Court’s ruling is
fundamentally flawed and, as such, we are evaluating all
possible alternatives," the group said.
    The company rejected the group's notice letter, saying it
failed to comply with company bylaws and was riddled with errors
ranging from mistakes in the nominees' standard questionnaires
to failing to properly disclose the group's funding.
    The company is being represented by law firms Sidley Austin
LLP and Potter Anderson & Corroon LLP while the activists are
being represented by Greenberg Traurig LLP and Baker Botts LLP.
    After the company rejected the nomination, the matter moved
to the courts.
    "Where the Plaintiffs ultimately went wrong here is by
playing fast and loose with their responses to key inquiries
embedded in the advance notice bylaw, the ruling said.
    This is the first time a Delaware court has been asked to
rule on a shareholder submitting a notice that failed to supply
information mandated by the company's bylaws.
    The company is valued at roughly $1 billion and its stock
price dropped 13.7% to $1.36 on Thursday. 
    

 (Reporting by Svea Herbst-Bayliss; Editing by Kirsten Donovan)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))