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Affymax, Inc. (AFFY) Message Board

  • godwinpeak godwinpeak May 16, 2013 5:28 PM Flag

    AFFY Current Shareholders Should Take the Pending Securities Class Actions Seriously

    There are at least two securites class actions pending against AFFY as disclosed in its 1st Q 10Q. There have been motions filed to consolidate the actions, and for the court to appoint a lead plaintiff and lead plaintiffs' counsel. Interestingly, Takeda is also joined as a defendant. One may ask what is the measure of damages? Generally it is the drop in stock market value between the value with the bad investment disclosures and the value with truthful investment disclosures disclosures. This measure is generally a range. In AFFY's case, there are allegations of price per share value of between $27 - $15 per share and a true value of about $2 per share after disclosures were made in fact. That yields a range of damages of between $431M and $925M.

    Of course, securities class actions never recover full value, and most are settled within about 4 years. In Bajaj, Mazumdar and Sarin, "Securities Class Action Settlements: An Empirical Analysis (Nov. 16, 2000), it was determined that average settlement of actions with over $100M in market drop, was 15.73% of the total market drop. Based on this average, the settlement value of the AFFY securities class action can be said to be somewhere between $67.79M and $145.5M. In any event, the securities class action is substantial and it would be nice to know AFFY's insurance coverage, other than its disclosure that coverage might be denied or prove inadequate.

    I might also point out that many settlements, 28.5%, provide for issuance of new stock to the claimants. I can imagine those damaged by inadequate Omontys disclosures might get both money and stock. Of course, such a settlement would come at the expense of the benefits of the Takeda milestone/royalties agreement and current AFFY shareholders.

    Be cautious in your AFFY long investment. Hope this helps put things in perspective, at least for some. GLTA.

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AFFY
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