Securities class action lawsuit filed on behalf of VBI Vaccines/PCC legacy shareholders


A securities class action lawsuit was recently brought forth to represent legacy shareholders of Paulson Capital Corporation, currently known as VBI Vaccines, Inc.

Andrews & Springer LLC announced on Nov. 26, 2014, that it had filed a suit representing investors who owned shares of PCC on Oct. 11, 2013, and were eligible to cast a vote at the organization’s annual meeting on Nov. 8, 2013. The law firm brought forth this claim, with case number 14-cv-9435, in the U.S. District Court, Southern District of New York.

VBI vaccines background
VBI Vaccines is a Cambridge, Massachusetts-based biopharmaceutical firm. Currently, the company’s work centers around creating new technologies to help expand vaccine protection in large markets that lack the attention they require.

PCC background
PCC was previously a publicly-traded financial services holding company that did business through Paulson Investment Company, its only subsidiary. PIC, founded in 1970 in Portland, Oregon, generated more than $1.2 billion in financing and led 175 private and public offerings of securities.

Class action lawsuit claims
The lawsuit brought forth by Andrews & Springer LLC claimed the company provided information to investors that was materially false and misleading. On Oct. 18, 2013, the company filed a Definitive Proxy Statement on Schedule 14A with the U.S. Securities and Exchange Commission and asked shareholders to vote in favor of a restructuring transaction.

The aforementioned proxy statement requested that investors vote to approve a transaction that would, among other things, form a liquidating trust and then spin off some legacy assets of both PCC and PIC. In a proxy statement with a record date of Oct. 11, 2013, PCC made several representations to shareholders, stating that the trust assets included, among other things, underwriter warrants, a 25 percent stake in PIC, trading and investment securities, accounts receivable, cash and an insurance policy covering the life of company founder Chester L.F. Paulson. In total, these were worth around $16.6 million.

Restructuring transaction approved
When the shareholder meeting took place on Nov. 8, 2013, investors voted to approve the restructuring transaction and the creation of a liquidating trust. However, PCC did not form the liquidating trust until on or around July 25, 2014, almost nine months after they released the October proxy statement. Shareholders were not aware of this delay.

VBI revealed in a 10-Q filing on Aug. 8, 2014, that PCC formed the liquidating trust with assets “valued at approximately $9.8 million.” This form 10-Q also indicated the ownership interests in PIC, disclosing that the trust’s 25 percent stake in PIC seems to have disappeared.

The law firm brought forth the securities class action lawsuit as a result of PCC’s omissions and misleading statements. Andrews & Springer LLC revealed that eligible investors who wish to serve as lead plaintiff have until 60 days following the law firm’s announcement of the shareholder class action – or until Jan. 26, 2015 – to move the court.

The law firm has also noted that the court system has not certified a class in the shareholder lawsuit. As a result, investors are not represented by counsel unless they retain one.