Anna Bradley-Smith  |  May 28, 2021

Category: Legal News

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GW Pharmaceuticals and its Board Lied to Shareholders, Lost Them Money, Class Action Lawsuit Alleges
(Photo Credit: Jirapong Manustrong/Shutterstock.com)

GW Pharmaceuticals and its board of directors lied to shareholders by undervaluing financial projections so they would approve a company merger, a new class action lawsuit alleges.

The nationwide class action lawsuit was filed in California on May 27 by lead Plaintiff Kurt Ziegler, who alleges that the company and its board caused him and other shareholders to lose money, as they violated the Securities Exchange Act.

According to the claim, the biopharmaceutical company commercialized the world’s first plant-derived cannabinoid prescription drug, Sativex, which is approved for the treatment of spasticity due to multiple sclerosis in 25 countries.

The company is based in the U.K., but has offices in California.

In February, GW entered into an agreement and plan of merger with U.S.-based company Jazz Pharmaceuticals so it could smoothly enter the U.S. market, the claim alleges.  

According to the class action lawsuit, GW board members decided to lower financial projections for Goldman Sachs and Centerview to use to prepare the valuation analyses that would eventually underlie their fairness opinions in Jazz Pharmaceutical’s offer of $220 per GW American Depositary Share.

“The Proxy provided a materially false and misleading valuation picture of GW by disseminating unreasonably low financial projections for 2021-2035 which were used to frame the Merger Consideration as ‘fair’,” the class action lawsuit states.

“In reality, the Merger Consideration significantly undercompensated GW shareholders provided them with substantially less than the intrinsic fair value of their shares.”

Ziegler alleges that the changes made to the numbers reflected in the projections are contradicted by and inconsistent with statements made by the company and management leading up to the merger, “and reflect just a fraction of the actual value of the company.”

He says that the lies told by the company and its board led shareholders to vote in favor of the merger and ultimately lose out on the deal.

Ziegler wants to represent anyone in the United States who held shares in GW. He is suing for violations of the Securities Exchange Act and seeks certification of the class, damages, legal fees, and a jury trial.

In another recent class action lawsuit alleging securities act violations, real estate investment trust Washington Prime Group, Inc. was hit with legal action for allegedly making positive statements about its business operations when its financial condition was deteriorating rapidly.

Have you ever lost money due to dodgy valuations by a company you hold shares in? Let us know in the comments section!

Ziegler is represented by Juan E. Monteverde and David E. Bower of Monteverde & Associates PC.

The GW Securities Exchange Act Class Action Lawsuit is Ziegler v. GW Pharmacueticals, PLC, et al., Case No. 3:21-cv-01019-BAS-MSB, in the U.S. District Court for the Southern District of California.


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