Replies to post #284052 on Avid Bioservices Inc (CDMO)

[NoMoDo]

depends on the type of deal...

If for example, they find a partner with the Exosome test kits, they can sit on the negotiations for a really long time. There can be preliminary contracts signed and they don't need to report until the final contract is signed. Even then, they have 7 days to announce after the final contract. So, they can sign a contract contingent a material event - such as success of a test kit. Once the contingency is no longer present (ie. success of the test kit), the must report.

Generally it is a good idea to report when the certainty of the deal becomes apparent - even if the contract is not yet signed, because of the likelihood of a material event. PPHM would be within their rights to wait until the CC to announce any major developments as we are between the end of the quarter and the CC.

Mergers are similar, however there is obviously more to deal with, including the SEC.

Parties to a merger must wait to receive comments from the SEC to the proxy statement (or the proxy statement/prospectus, as applicable) and resolve all comments received prior to distributing definitive disclosure documents to the target shareholders.

This usually takes about a month if all goes well. So both companies can spend 6 months negotiating, then sign an agreement, file with the SEC, wait about a month, and then report the deal.

Limited duty to disclose negotiations
A company does not have a general duty to disclose material non-public facts or corporate developments, including the existence of merger negotiations. However, under the basic anti-fraud provision of the Exchange Act, a company is required to disclose merger negotiations that it deems to be material if any of the following apply (Rule 10b-5):

* The company trades in its own securities.
* The company leaks the details of negotiations into the market.
* Disclosure is necessary to correct previous misstatements and to correct statements, which, although correct when made, become incorrect over time or from subsequent events.

In addition, the stock exchange or market on which the parties are listed may require disclosure when rumours or unusual market activity indicate that the confidentiality of merger negotiations can no longer be maintained (see section 202.03, New York Stock Exchange (NYSE) Listed Company Manual and Rule IM-4120-1, NASD Manual).

So from the above, the company would not want a shareholder to ask at a CC if they are involved in any final negotiations with a partner or if there are currently discussing merger possibilities. If that happened, they cannot lie, but they could respond that they have a policy to not discuss any current or future deals until a contract is signed. It would however, cause a stir no matter how they answered.