Moatable Inc ADR (MTBLY)

[downthehatch]

Latest filing in the case shows the problem with Judge Borrok's ruling.

All who are interested should search the case here: https://iapps.courts.state.ny.us/webcivil/FCASSearch

Use docket # 653594/2018.

The latest filing is from a lawyer representing a fund that held shares around June 2018, after the RenRen spinoff of assets was announced (April 29, 2018), but before the closing of the transaction (June 21, 2018) that stripped out the valuable assets, and gave a small dividend to minority holders.

While the Judge ruled that the date of harm to the minority holders was April 29, when the carve-out/spinoff was announced (since as he said "the market is efficient" and after that date holders knew what they would get, and could choose to take the dividend or sell at the then somewhat reduced value, and not get the dividend.)

The new filing, on behalf of a holder as of June 21, 2018 argues that the spinoff was not certain as of April 29, and might never have occurred, and therefore there was no actual harm until the closing of the transaction on June 21, 2018.

While that is a great argument, it points out the difficulty with treating the case as though it is a class action, rather than as a shareholder's derivative action. If you treat it as a class action, as the judge apparently did in his ruling, it becomes difficult to set the date of harm, and doesn't make sense to do it long after the suit was filed.

A class action is established as of a particular time, and the class is certified relative to that specific time, when the case is first brought and the class is certified.

A shareholder's derivative action, on the other hand, since it is for the benefit of the corporation (and, by extension, current shareholders) does not need to determine when any particular group of shareholders was injured, or by how much on what date, since the harm is to the corporation itself, and the benefits of the lawsuit, or a settlement of it, accrue to the corporation.

The settlement, in this case, was structured in a way that it benefited current shareholders, as it should, but also excluded from recovery the shareholders and entities responsible for the bad acts, since they are also current shareholders.

The settlement could well have simply had the payment go to the corporation, in which case the judge would not have been focused on the "record date" which was only created here to deal with the specific issues of this case.

I think this explains why the share price keeps rising, as lawyers likely look at this and see that Judge Borrok's ruling is likely to be overturned on appeal.