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Tuesday, December 10, 2019

Lawsuit: Abbvie's after-hours share offer adjustment cost investors $100M


By Scott Holland | Jul 30, 2018

Law money 05

A group of Abbvie investors who say they and others like them collectively lost more than $100 million when the pharmaceutical giant used an after-hours press release to adjust a share price tender offer, has sued the company in a federal securities class action filed July 26 in Chicago.

Walleye Trading LLC is leading the charge against Abbvie, Inc., and William Chase, the company’s executive vice president and chief financial officer. The class would include anyone who bought Abbvie securities on May 30, the day the company announced preliminary results of a month-long “Dutch auction” stock buyback.

Under such a buyback, a company sets both a total it plans to spend — in this case $7.5 billion — and a price range at which it will buy a fixed dollar amount of existing stock from shareholders, who also report what per-price share they may accept.

According to the complaint, Abbvie’s initial May 30 statement said it agreed to spend $105 per share, yielding 71.4 million shares, about 4.5 percent of outstanding stock. The news pushed stock prices to $100.83 and $103.16 on May 30, closing at $103.01, a 3.5 percent gain compared to May 29. On May 30, more than 31 million Abbvie shares were traded, or more than $3.1 billion in volume, the most in a single day since 2014.

However, about 45 minutes after the market closed May 30, Abbvie updated its morning press release to announce it actually would spend $103 per share to acquire about 72.8 million shares.

“Learning that shareholders would instead be sellers at $103, by comparison, dampened that optimistic market assessment,” the complaint alleged. “When the market found out that the Dutch Tender Offer was actually priced at $103 per share, the consequences were swift and brutal.”

On May 31, Abbvie stock traded between $98.50 and $101 per share, closing at $98.94, down nearly 4 percent from May 30. Almost 19 million shares were traded May 31, and the complaint said the result is people who bought Abbvie stock May 30 collectively lost more than $100 million in less than 24 hours.

Although the May 30 morning release was preliminary, the complaint said “it is quite atypical to revise the tender clearing price in a Dutch tender offer — especially of the magnitude experienced” in this situation. The complaint took Abbvie to task for implying in its corrected statement that its depositary, Computershare Trust Company, erroneously omitted shares from initial results.

The complaint accused Abbvie of either choosing to let the market close before revealing the accurate information or else being negligent to the point of liability. It also said Computerhsare “acted with reckless indifference” by either failing to check its math or by failing to incorporate all the available data.

According to Walleye, Chase had access to relevant information on May 30 and should’ve been able to either identify nearly four million validly tendered shares or “perform third-grade arithmetic” to detect a problem before allowing the initial statement to go public.

Formal allegations against Abbvie and Chase include two violations of the Exchange Act, with a third count levied against Chase alone, saying he “had a duty to disseminate accurate and truthful information” regarding Abbvie’s financial condition and the results of the tender offer.

In addition to class certification and a jury trial, Walleye wants Abbvie to pay damages with interest.

Representing the investors, and putative class attorney, are lawyers from Keller Lenkner LLC, with offices in Chicago and New York.

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U.S. District Court for the Northern District of IllinoisAbbvie

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