Investing is supposed to be a long-term strategy to build wealth, but expecting shareholders to wait more than 60 years before they can get a fair return on their investment is far beyond what any investor would consider reasonable.
That was allegedly the case for the minority shareholders of Promega Corp., the biotechnology company based in Fitchburg, Wisconsin. According to a lawsuit filed by shareholders back in 2016, Bill Linton, Promega’s founder and CEO, allegedly used manipulative and bullying tactics to become a majority shareholder of the company. His actions allegedly left the minority shareholders with no hope of getting a decent return on their investments before 2078 at the earliest.
Circuit Judge Valerie Bailey-Rihn, who has been hearing the case, has said that she was leaning towards the plaintiffs and agreeing that they had been oppressed by Linton’s actions. Now the only two things left to determine are 1) how to punish Promega and provide restitution for the minority shareholders who were allegedly oppressed by Linton’s actions; and 2) how to determine the price of the stocks for which the minority shareholders are allegedly owed compensation.
Regarding the first point, one of the options is to dissolve the company, but Bailey-Rihn has already said that wouldn’t benefit anyone. Alternatively, Promega could buy shares back from its investors, or revert the shares back to what they were worth in 2014 before the alleged oppression began.
In addition to trying to figure out how the allegedly wronged minority shareholders should be compensated, attorneys have also been arguing over how to determine the value of the stocks owned by the shareholders. Both sides agree that Promega’s stock has considerably increased in value since the lawsuit was filed in 2016, so the question becomes whether to use the stock’s 2016 value or a more current value when buying stock back from the minority shareholders included as plaintiffs in the lawsuit.
Attorneys for Promega claim they should value the stock at what it was worth in 2016 when the lawsuit was filed, while attorneys for the shareholders argue they should use a more current valuation. It’s not surprising that each side wants to use a value that benefits their clients, but they each have a legal point to be made in their arguments. If the shareholders wanted to be compensated for their alleged grievances back in 2016 when they first filed the lawsuit, then there’s something to be said for the fact that it makes some sense to buy back their shares at the price it was worth at that time.
On the other hand, the shareholders are still shareholders, meaning they still own their stocks, and so it makes sense to buy their shares back from them at the price the stocks are worth at the time they are bought back, as is standard when buying and selling stocks.
Requiring Promega to buy back the stocks at a higher price point might also serve as a punitive measure that will hopefully deter Linton, or anyone else in the company, from ever again engaging the in the alleged oppressive tactics.
At Lubin Austermuehle, we’re all business when it comes to offering the highest level of quality service to businesses engaged in complex shareholder and LLC member disputes, whether it’s shareholder oppression, partnership dissolution, breach of fiduciary duty, stolen corporate opportunities and far more. We’re also class action attorneys who have earned a reputation for victories, including what Crain’s Chicago Business called “the largest class action settlement in Illinois.” From Warrenville and Lisle to the Waukegan, we are here for you. Call and take advantage of our FREE consultation where we can discuss your specific needs and wishes and our ability to meet them. Contact us here or call us on our locally number at 630-333-0333.