MONTH-IN-BRIEF (Oct 2020)
Southern District of New York Dismisses WuXi PharmaTech Section 10(b) Suit
By John Adgent
On October 14, 2020, the United States District Court for the Southern District of New York (the “Court”) granted WuXi PharmaTech (Cayman) Inc.’s, a pharmaceutical technology corporation (“WuXi”), motion to dismiss a consolidated class action complaint brought by a former securityholder, Altimeo Asset Management (“Altimeo”). Altimeo’s claim alleged that WuXi defrauded its former securityholders in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 by concealing plans to relist several of its subsidiaries on foreign stock exchanges following a go-private merger. Altimeo claimed that by concealing the plans to relist its subsidiaries, WuXi depressed the merger price paid to its former securityholders in the transaction to take WuXi private.
The Court dismissed the claim after finding that Altimeo failed to plausibly allege a material misrepresentation or omission as required for a claim under Section 10(b). The Court first noted that WuXi’s proxy materials disclosed that “[t]he buyer group may consider re-listing the Company’s equity on the Chinese or Hong Kong stock exchanges, which may have higher valuations.” Thus, WuXi explicitly disclosed that a future relisting at a higher valuation was possible and, according to the Court, a reasonable investor would have understood that possibility.