The chief executive of ASX-listed biotech firm Cellmid has been accused of breaching continuous disclosure rules by spruiking newly acquired COVID-19 diagnostic tests in now-deleted social media posts before the company told the market about its licensed distribution deal with the Chinese manufacturer.
The Sydney-based Cellmid will now counsel managing director Maria Halasz and the rest of its senior executives on the company’s social media policy after the Australian Securities Exchange raised concerns that the group had “breached listing rule 15.7” as a number of posts on Ms Halasz’s Twitter and Instagram profiles “appeared prior to the announcement being released to the ASX”.
The ASX listing rules prohibit material information being circulated before it is released to the market, ensuring that shareholders cannot trade on insider information while ensuring all investors and potential scripholders are treated equally.
Shares in Cellmid surged 237 per cent from a decade-low when it announced to the ASX on March 27 it had signed a supply agreement for a rapid diagnostic test kit — made by Guangzhou Wondfo Biotech — which could detect coronavirus cases “in no more than 15 minutes” and which had gained regulatory approval in several overseas jurisdictions, including the UK, Belgium, Spain and Germany.
A few days earlier, Ms Halasz, the managing director of Cellmid, had made several public posts on Twitter and Instagram, alerting an unknown number of people to news the company was now one of the “licensed distributors” for the tests. The March 23 posts were subsequently deleted.
“Some Twitter and Instagram users subsequently reposted or shared the posts on Twitter and the internet discussion forum HotCopper,” the Australian Securities Exchange said in a “please explain” letter sent to Cellmid last week.
According to screenshots of the now-deleted social media posts, Ms Halasz told her Twitter followers on March 23 that she had an “important update $CDY shareholders”. “I’m negative! I know this because I was able to rest myself with the first validated rapid diagnostic test for #COVID-19,” Ms Halasz said, attaching a picture of the new diagnostic test smattered with a spot of blood from a “little needle prick” on her middle finger.
On her Instagram page, Ms Halasz uploaded a picture of the same test kit with the caption: “It’s good to know I’m negative. This is the first rapid diagnostic test in Australia that gives you a result in 2 minutes. At least now I know in two minutes that I won’t endanger anyone else,” she said.
Ms Halasz also responded to a comment on the Instagram post asking about the test: “We are the licensed distributors. Will have them available next week on path(ology) labs.”
According to rules for listed companies, once a firm becomes aware of any information that would have a material influence on the price of the stock, the company must immediately tell the ASX. “As the posts appeared prior to the announcement being released to ASX, it appears that CDY has breached listing rule 15.7,” the sharemarket regulator said.
In a note responding to the ASX query letter, Cellmid company secretary Lee Tamplin said the company’s shares were in a trading halt from Friday 20 March, the point at which the group had reached “an advanced stage of negotiations” with the Chinese company that produces the COVID-19 tests.
The deal was signed over the following weekend, and an announcement was scheduled to be made to the ASX before the start of trade on Tuesday 24 March.
“The company’s shares were in a trading halt ensuring that there could be no trading on an uninformed basis,” Mr Tamplin said.
He also said that “it was not understood” that the ASX listing rule and Cellmid’s own social media policy “remained applicable during a trading halt … when there could be no impact upon the company’s share price nor could there be any trading on an uninformed basis”.
“The first tweet by Maria Halasz during Monday, 23 March 2020 was a personal one showing that she had taken a rapid test; no details in relation to a supply agreement were disclosed at that stage,” Mr Tamplin said.
“A comment on that tweet Ms Halasz advised that CDY was the licensed distributor of the tests … was sent at a time Ms Halasz believed the company had complied with its disclosure obligations.”
Mr Tamplin said because of the “misunderstanding”, the company would remind all officers of the company’s social media policy, which applied “even during an embargoed basis”.
The ASX has ramped up its policing of COVID-19 related statements after it “disturbingly” experienced a significant number of companies making “potentially misleading claims” in relation to the coronavirus.
In an update released last week, the ASX said companies were telling investors they had found a cure for the coronavirus, that their product “kills the COVID-19 virus” or that they had developed new testing kits for the virus that would put a rocket under sales, all statements that warranted further inspection.
Cellmid on Tuesday revealed it had raised $6m to help fund the rollout of its diagnostic test kits, sending shares a further 30 per cent higher. The stock is now up 350 per cent since it struck the distribution deal. Ms Halasz was approached for comment.
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