PixarBio Corporation’s CEO used the company as a vehicle for a feud with another company, charges the complaint for this class action. It claims that PixarBio made misleading statements about its activities, its aims, and the use of funds from its offerings, in violation of the Securities Exchange Act of 1934.
The class for this action is all persons and entities who acquired the securities of PixarBio (1) pursuant or traceable to the company’s private placement that closed on October 30, 2016, or (2) publicly traded on the open market between October 30, 2016 and January 23, 2017.
PixarBio has claimed to be a specialty pharmaceutical and biotechnology company that concentrates on the pre-clinical and clinical development of neurological drug delivery systems for post-operative pain. PixarBio’s CEO, CFO and Chief Scientific Officer is Francis M. Reynolds.
In 2005, before PixarBio existed, Reynolds founded InVivo Therapeutics Corporation, with technology developed by Robert S. Langer. Reynolds was a major shareholder, with over 21% of its common stock. However, the complaint says that in 2013, he was forced out for inappropriate personal uses of company funds.
The complaint claims that Reynolds began selling off InVivo stock to lower its price. After that, he founded the company that eventually became PixarBio, with Langer supposedly as a co-founder, but the complaint suggests that Langer may have had no real role in the company.
According to the complaint, however, Reynolds continued his campaign against InVivo, filing a lawsuit against them in July 2016.
PixareBio eventually went public. In October 2016, it held a stock offering, but the complaint claims that the company did not intend to use the money for product development but for Reynolds’s war with InVivo.
The complaint claims that the Securities and Exchange Commission (SEC) began an investigation of the company shortly after it began trading publicly.
On January 3, 2017, PixarBio announced a take-over bid for InVivo for $77 million, which the complaint claims was about half of InVivo’s market value. Much of the press release was spent criticizing InVivo and praising Reynolds. It also claimed Reynolds owned patent rights to some of InVivo’s technology. The complaint claims that this was not a serious purchase offer but another attempt to damage InVivo.
On January 23, 2017, the SEC halted trading in PixarBio securities due to questions about “(1) the company’s business combinations and current shareholders; (2) the identity and qualifications of key shareholders and employees; and (3) the company’s current and prospective development efforts.”
The complaint also claims that, since the failed bid for InVivo, “there is no evidence that PixarBio has engaged in any sort of scientific research and development.” It claims that the company has been turned out of its headquarters and has seen the departure of prominent executives. Although the SEC’s suspension of trading has expired, the complaint claims that the company’s stock has bee trading at less than $1 per share. SEC staff may file an enforcement action against the company.