@whytee I think you have a misunderstanding of the settlement of the US legal action. The decision to settle is taken by the insurer, not by Mesoblast. The risk of loss is to the insurer and so the insurer makes a commercial decision as to costs of fighting the case, probability of winning and cost of losing, including the cost to the insurer of fighting this action in management time and money. Whether Mesoblast wants to go on fighting in the courts in such an action wouldn't matter to the insurer, no matter how high MSB thought their probability of winning was.
In this case, the insurer has taken the commercial decision to settle on a class wide basis for $2.0 million, with no admission of liability. This settlement was paid by the Company's insurer in May 2022, other than the minimum excess as per the Company’s insurance policy. The court granted final approval of the settlement on August 15, 2022.
Mesoblast's excess was probably around a typical $0.5m, so the cost to the insurer would've been around $US1.5m.
That's peanuts in the world of US insurance litigation, and it makes sense for the insurer to settle and concentrate their management time on really big litigation where they could make or lose many times this settlement amount.
The Rosen Law Firm for the plaintiffs was claiming $US667,000 in attorneys fees (i.e. one-third of the settlement amount), meaning the investors forming the class would receive a lousy $1.3m.
The cash deal represents around “2.7-3.7% of the potential maximum recoverable damages,” which is well within a reasonable range “given the risks of continued litigation,” the biomedical company’s investors said in a memo filed in support of their preliminary settlement approval motion in the U.S. District Court for the Southern District of New York.
So the rogue investors who started this class action were worried about the risks of continued litigation, were happy to settle for a pittance and Mesoblast's insurers signed off on the settlement without admitting liability for a net cost to the insurer of chump change relative to the cost of defending a long action and also relative to the cost of diverting their attention from more important cases. Small net loss to the insurer, tiny net gain to the class action lawyers (probably lucky to cover their expenses and salaries involved) and small gain to the class-action recipients in the US which was probably more than offset by their losses in the drop in the share price caused by all the speculation around this class action. You wonder what they were thinking.
So whytee, if you reckon this payment is evidence of anything, you don't understand how the insurance litigation process works.
Second close above $1 today, although $1.01 is hardly a convincing break, and volumes are moving back down into the pre-announcement, pre-AGM band. It is quite possible there was a bit of short covering going on in the runup to the AGM to offset the risk of good announcements. That was enough to move the share price up through $1 - and if there was shortcovering we should see some evidence of it next week. It shows that the price can gain significant momentum with just a small amount of extra buying volumes - small in relation to the huge volumes we saw a couple of years ago when MSB was running hard. Net shorts have dropped from 8% to 4% of the company's capital recently (mainly thanks to the 75c placement) but that is still a significant amount of potential buying should the shorts decide that there are no more easy gains for them. With over 40 days to cover the short, an imminent submission "in short order" of the BLA is a significant risk for the shorts:
As time goes by and the share price remains elevated vs the past 50 days and 200 days averages, the date of the Golden Cross comes a little closer and the likelihood of it happening improves. On current indications, an average price of $1.02 in the next 7 trading days would see the cross occur on Tues 6 Dec (i.e. 7 trading days), and we only need an average price of 95c for the next 9 days to see the cross occur on Thurs 8 Dec. That's quite possible, and in fact is likely given the current price - it would have to have a big fall soon to average under 95c between now and 8 Dec. So, within two weeks we are likely to see the Golden Cross occur, hopefully coinciding with an announcement that the BLA has been fully submitted. That'd give the shorts something to think about!
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