LOS ANGELES (CN) - A biotech company claims in court that an investment news website defamed it in articles and made money by shorting the stock.
Galena Biopharma sued PropThink LLC, two of its editors and four "contributors," in Superior Court.
Galena claims the defendants' two articles November articles knocked $39 million off its market cap in a single day.
The articles, published on Nov. 12 and 15, "state that Galena, among other things: (a) lacks 'faith' in its own products; (a) [sic] perpetrated a 'hoax' on investors; (c) lacks transparency at the expense of its stockholders; (d) engineered hundreds of millions of dollars of 'phantom' value; and (e) has as its main product candidate something that is not likely to work", according to the 21-page lawsuit.
It continues: "Each of these false and libelous conclusions are based on statements that PropThink holds out as facts that are false and misleading. The articles are a 'hit piece' on Galena.
"But before publishing these articles, the authors and editors at PropThink took 'short' positions on Galena's stock. That is, if, as could be expected, Galena's stock dropped as a result of the publication of the articles, the PropThink team stood to make a fortune."
Galena claims the articles accused it of lacking faith in its breast cancer vaccine, NueVax.
It claims that PropThink made sure the article reached a worldwide audience by placing it on the Reuters news feed, where it was picked up by Yahoo! Finance.
It does not specify how much the defendants made from their alleged short position on Galena stock, but says the defendants' "plan worked to perfection."
"On the day the PropThink published the first article, the trading price of Galena common stock plummeted nearly 30 percent. Specifically, Galena's stock opened on The Nasdaq Capital Market at $1.98 and closed at $1.40 - on trading volume of 11,918,900 shares, which is more than 8 times the average daily trading volume for the 30 previous trading days. There was no other news about Galena that day. The decline in Galena's stock price triggered by the defendants' libelous article wiped out over $39 million of Galena's market value in a single day," the complaint states.
Defendants include PropThink managing editor David Moskowitz, associate managing editor Jacob King, and contributors Jason Napodano, David Sobek, Ivan Deryugin, and Adam Sans.
Galena seeks damages for libel and trade libel.
It is represented by Christopher Lilly, with TroyGould.
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