METICULOUS OBSERVATION OF TRIAL
A purchaser company terminated its deal to buy a pharma company target. The market projected the state court judge would compel the purchaser to complete the deal given that state’s strong legal precedent against buyers breaking deals.
Analysis: Watched the entire trial, closely observed the trial judge’s responses to the evidence and fact and expert witness testimony and later hostility to the target company’s counsel’s argument during post-trial hearing, leading to a projection that the court would ultimately rule against the target.
MASS TORT ANALYSIS
A spinoff company faced thousands of mass tort claims for toxic contamination by its former parent. The market penalized the spinoff, fearing potential future large jury verdicts that the spinoff would not be able to pay.
Analysis: Analyzed all the dynamics of the litigation, including (1) the range of costs to settle various types of victims’ diseases on a mass basis, (2) the former parent’s likely keen interest in ensuring that the spinoff avoided a bankruptcy filing (and thus avoid a repeat of a Tronox/Anadarko fraudulent transfer lawsuit) and (3) the plaintiffs’ inability to force enough sequential jury trials to pressure the spinoff into a fast and painful settlement. Projected a very low cost for the spinoff to settle the claims (much lower than implied by its stock price). This de-risked the litigation.
SOVEREIGN LITIGATION ANALYSIS
U.S. federal courts ruled that a sovereign country had breached a key clause in its bond indenture but that country refused to pay certain categories of bondholders.
Analysis: Analyzed every single twist and turn of complex litigation through the federal court system, helping to enable opportunistic trading of bonds through extremely volatile price action. When the country later defaulted on its debt, helped guide an ad hoc committee of bondholders during litigation and settlement negotiations.
ANALYSIS OF SECURITIES CLASS ACTION
Market was concerned that a securities class action against a quasi-sovereign entity (“QSE”) heading to an imminent trial would either yield a massive jury verdict or force the QSE to pay a massive settlement to QSE shareholders to avoid such a jury trial and verdict.
Analysis: Projected that the federal court judge’s class certification ruling would be modified on appeal which would give the QSE time and new-found leverage to negotiate a reasonable settlement and thus avoid trial and a large jury verdict. Advised that the market had significantly overestimated the true cost to settle the class action and that the eventual shareholder settlement would be much lower than market expectations. This de-risked the litigation.
PHARMA COMPANY MASS TORT ANALYSIS
Pharmaceutical company withdrew a blockbuster drug after studies showed it had negative health consequences — causing the company’s stock to sink due to lost sales and projections of massive future litigation liability.
Analysis: Concluded that (1) the market mistakenly saw the drug litigation as “the next asbestos debacle,” failed to appreciate the significant differences between the company’s drug litigation and asbestos litigation and ignored the company’s ability to eventually win jury trials; (2) all the claims would eventually settle for a fraction of the litigation cost built into the stock price. Helped to de-risk the litigation.