Sinovac (NASDAQ: SVA) Dilution of Stock to Go Private Class Action

This class action concerns stock ownership in Sinovac (NASDAQ: SVA), a vaccine company the complaint calls “the world’s single largest producer of Covid-19 vaccines.” It brings suit against Sinovac and its founder, president, CEO, and chairman Weidong Yin, for diluting the stock in trying take the company private.

The class for this action is all shareholders of Sinovac common stock, except for the defendants in this case and any person, firm, trust, corporation, or other entity related or affiliated with them and their successors in interest, who are or will be threatened with injury arising out of the defendants’ wrongful actions as described in the complaint.

The complaint alleges that Sinovac had been developing a new polio vaccine that might increase the value of the company. The World Health Organization (WHO), trying to eradicate polio, was urging developing countries to introduce inactive polio vaccines (IPVs) and phase out oral polio vaccines (OPVs).

The complaint claims that “the market for cheaper ‘inactive’ versions of a polio vaccine is enormous and the development of a less expensive ‘inactive’ vaccine has assumed critical importance in the global fight against polio.” Sinovac began trials in 2016, with testing expected to end in 2018.

Yin tried to take the company private in 2016 but failed, the complaint alleges, because of a larger bid from another group. After that, Sinovac’s Board of Directors adopted a Rights Agreement that contained a “poison pill” that the complaint claims provided “that if a person or group acquired or announced an intent to acquire at least 15% of Sinovac stock, Yin and the Board could massively dilute all such shareholders.”

In 2017, Yin joined forces with Vivo Capital, Advantech Capital, and two others to try again to take the company private but again failed.

In April 2018, Sinovac announced preliminary good results for Phase III trials of the polio vaccine, but it did not provide detailed data, so that its actual performance could not be assessed.

In July 2018, Sinovac agreed to sell Vivo and Advantech 11.8 shares of Sinovac common stock for $7.35 a share via a private investment in public equity (PIPE) transaction. At the time, however, the complaint alleges another party had bid $8 per share and the shares were trading at $7.46. “As a result of the unfairly low[-]priced PIPE Transaction,” the complaint alleges, “the shareholder voting power and percentage ownership of Sinovac equity by [the other shareholders] decreased, while Yin and his friendly investors amassed a dominant percentage of Sinovac’s shareholder voting power.”

After that, the complaint alleges, “Sinovac engaged in several additional transactions in which Sinovac issued further dilutive equity at prices that valued the company as much as 7x greater than the value implied in the PIPE Transaction.”

Meanwhile, the complaint claims that Sinovac has been very successful “and is currently one of the world’s largest manufacturers of vaccines” while “public shareholders have been deprived of their rightful pro rata portion of Sinovac’s success…”

Article Type: Lawsuit
Topic: Securities
Tags: Equity Dilution, Securities