Threes, now that you have formalized a complaint against PPHM management and directors with the SEC and you say the complaint has been transferred to the Office of Attorney General in California, I am wondering about what consequential outcomes may result and pondering what direction the OAG investigation will need to go, beyond your initial complaint against the existing PPHM management team and BOD. Notably, your complaint included the following point which you said is now part of the OAG investigation:
MIsleading PR related to the need to avoid a reverse split while quietly selling ATM common shares negating any chance of reaching required $1.00 threshold.
I presume that a proper investigation by the SEC and CA OAG of the ATM sales will extend to all of the PPHM trading market influencers that could support or give cause to challenge the PPHM BODs' perceived need to make the ATM sales to raise operational funds, influence the pps at which the ATM sales were able to be priced, the parties with whom the common shares were placed for ultimate sale and which party acquired ultimate ownership of the new issue ATM shares that may have financially benefited from the PPHM BOD hardship decisions. I observe that over the last six+ months period during which avoidance of the RS has been emphasized to be at risk to avoid PPHM NASDAQ delisting, there has also been an inordinately high percentage of naked shorting of PPHM shares cited, stretching across the timing of your SEC complaint reference to PPHM management's SEC filed communications affirming that PPHM was seeking to restore compliance with NASDAQ listing requirements without implementing a reverse split-- through the period when ATM decision and pricing influencing factors were playing themselves out.
Remarkably, during this same RS risk period, we learned that PPHM/Avid's largest customer had informed Avid it was delaying its acceptance of product and reducing orders PPHM had been anticipating as needed to reach Avid sales targets for PPHM's 2017 fiscal year which ended April 30, 2017. The SEC and CA OAG would likely need to investigate whether this placed PPHM at risk for preserving operational cash requirements needed to avoid its accountant issuing a financial going concern clause and whether knowledge of the Halozyme hardship was privileged information before PPHM publicly announced the problem during their investor conference call.
In turn, across this six month period, the pps ended up at $3.11 (the August 23, 2017 close or about $0.44 pre-RS) which is a about fifteen percent below where the pps was trading at the start of the six months period, on February 23 ($3.56 or about $0.51 pps pre RS). Extroardinarily for PPHM's institutional investor history, what had recently only exhibited Dart's Eastern Capital doing >5% SEC reporting, there has been an emergence of three new hedge funds who acquired just under 15% ownership in the PPHM common and convertible preferred stock over this six month period in which the pps experienced a net reduction. Two of these new hedge fund PPHM, >5% shareholders are now nominating three directors for the PPHM Board who, if approved by shareholder proxy in October, would be taking over control of PPHM and management of Avid plus all of PPHM's technology rights from old, current and ongoing trials, agreements and collaborations.
Since you indicated that the SEC has now referred your complaint to the CA OAG for pursuit, it appears that the inclusion in your complaint of PPHM management action to issue ATM shares during this critical six month period should result in the OAG and SEC investigation extending to all relevant PPHM management, ATM decision influencers in play during that period. Off hand, I can see that investigation of influencers on the perceived need for the ATM and the ATM pricing and placement extending to:
- associated hedge fund position acquisitions or divestment that could influence the pps at which the ATM would be placed (did the ATM placements precede or follow hedge fund position establishment or otherwise lower the cost of position establishment? Was there communication of inside information that influenced position establishment or timing of the ATM placements?),
- the high percentage of naked short trading influencing the ATM placement pps and Reverse Split assessment period (was the naked shorting legal, was shorting practiced on behalf of the PPHM Board itself or the hedge funds associated with the ownership position establishment?),
- the basis by which the Halozyme sales came under hardship (were sales delayed or reduced such that they accelerated PPHM cash flow needs, warranting alternative cash sources like the ATM and more importantly, were the Halozyme sales problems communicated while they were carrying insider information status or were the reduced Halozyme sales influenced by parties who carried a financial interest in PPHM?),
- associated Board member and other trading parties' purchases or sale of options, puts and calls, common or preferred stock that could translate to financial benefit due to PPHM inside information or ATM placements and
- trial progress, technical paper development or trial results information that could have been designated as material insider information held by PPHM management but shared by PPHM in confidence to PPHM's conferring investor groups and Pharma.
Considering all the above, I don't know what to expect from the CA OAG investigation of the ATM sales by PPHM management, but it does appear that the ATM sales occurred during what appears to be a significant PPHM financial hardship period. I do hope that, if the OAG or SEC finds that illegal naked shorting or insider information was used for illegal advantaging of parties over the period that PPHM issued the ATM sales, that appropriate enforcement of penalties be imposed. Pandora's box has been opened!
Best wishes and IMO.
KT
