Friday, August 28, 2009

Biovail Gets Turfed Out Of Court

Canada has stricter anti-defamation laws and customs than the United States, so it's not that much of a surprise that a Canadian company used to Canadian norms would have its defamationesque lawsuit thrown out by an American court. That was the fate of a lawsuit launched by drug-delivery technologies maker Biovail Corp. against SAC Capital Advisors, in which Biovail accused SAC of producing misleadingly negative research for the benefit of SAC's short positions of Biovail stock.

It seems that Biovail hasn't exactly been an obedient corporate citizen with respect to the regulators, although that factor didn't influence Judge Goldman's dismissing its lawsuit. He said that he lacked jurisdiction, and that Biovail had failed to meet its burden of showing entitlement to damages.

As it turns out, Biovail is one of those companies that's claimed as a victim of so-called naked shorting. As a related post in Blogging Stock points out, the company's checkered past doesn't make it much of a poster child for any campaign against naked short sellers.

The headquarters of the naked-shorter watch is, of course, Patrick Byrne's Deep Capture Website. Those not impressed with the crew (or the company Mr. Byrne's CEO of, label those guys conspiracy theorists.

Biovail is the first Low P/E Bin company associated with this crew. Those unenchanted by the Deep Capture world emphasize that cries of 'abusive shorters' tend to be made by companies whose stocks basically deserve to be shorted, or at least avoided. Ironically, Biovail has the highest 52-week change in the entire Bin: up 35.81%.

Update: Subsequent to the original part of this post, Biovail has dropped 6.92%. This item provides a certain closure to the tale: one of the defendants in that thrown-out lawsuit, analyst David Maris, has moved on to yet another firm. He had initiated coverage of Biovail with a "sell" recommendation while still with Bank of America, and was dropped out of the lawsuit when he left BoA.

That last point, an analyst might do well to take to heart.

Also, has an excerpt of Judge Goldman's reasoning, in which he stated that a mere drop in share price does not constitute damages under the rubric of trade libel. In order to claim damages in this manner, a company has to prove that it was cut off from access to credit, or had another kind of financing ruined, as a result of the stock price drop. Biovail didn't.
[I got this article from]

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