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  • larry62308 larry62308 May 9, 2011 11:27 AM Flag

    I am a lawyer and long in ABAT...

    I have handled securities cases on both sides of the docket and see some misunderstandings on this board that should be clarified.

    First, any time a stock drops a certain amount (and certainly as much as ABAT did) the securities shark bar [which I have participated in] files a number of lawsuits. Those lawyers make their living (and a good one) by filing as many such suits as they can each year knowing they will only collect fees (usually over $100K each) in a few - and the cost of filing is less than $1000. Whether they actually make real money is dependent on their position in the suit as lead counsel - or whether they have the "lead plaintiff" - more on that below.

    However, the point is that the short sellers obviously know how the game is played and have found a system to utilize it in their trading: publish information the lawyers will independently seize upon to file suits and drive down the stock. The short sellers get the benefit of the publicity from the "piling on" of lawsuits by the plaintiffs' securities bar without expending any real effort to publicize their assertions.

    Second, there will be no resolution of the securities case when a lead plaintiff is chosen at the end of the month. US securities laws (specifically the PSLRA) sets the procedure for handling these cases and the first step is that - from all the cases that have been filed - the court will select the "lead plaintiff(s)" [and their lawyers] to run the case. The competition for lead plaintiff position is fierce because those are the lawyers who make the most money in the case.

    Then there will be motions to dismiss and responses to those motions filed; that will take at least 6 months. 90% of those motions are denied, which means the suit will continue into discovery - but it also means settlement talks will begin. From there, it is anyone's guess how long the lawsuit will last...I'd bet on 2-3 years.

    As for the company responding to the allegations, the safest thing to do it to do nothing in the press and respond in the lawsuit - or issue press released in conjunction with your lawsuit filings. That means the first real opportunity for the company to substantively respond (if it follows the usual pattern) will be in responding to the motions to dismiss -- in federal court [which is where these suits must be maintained] no substantive response is provided in the "answer" to the lawsuit complaint itself; the "answer" is really just a series of minimalist denials of the charges and claims made in the complaint.

    SO - bottom line - I anticipate no speedy resolution of the suit or response from the company outside the context of the suit to the allegations themselves. What the company could do it release a strong earnings statement and institute a share buy-back program to boost share price, but that is a business strategy to deal with share price devaluation...I do not see (or anticipate) a legal strategy or avenue to do so.

    As I said, I am long in ABAT because the existence of the lawsuits mean nothing outside of the strength of the allegations - and I do not believe the allegations. I know how the game is played so the multiple lawsuits are irrelevant - by next month they will be consolidated into one suit with one set of lawyers running it and the process will be ongoing for a while. The only real question here is how much will ABAT pay to make the suit go away at some point, and how real is the company behind the stock I hold. I'm betting on the company.

    Good luck to the longs.

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