Sorrento stock deal goes through just days before it runs out of money
(Bloomberg) — Sorrento Therapeutics Inc., which filed for bankruptcy in February after facing attacks from short sellers for prematurely announcing it had developed a cure for Covid-19, received court approval to sell a large stake in its publicly traded stock Subsidiary.
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According to court documents, the San Diego-based company will sell its shares in Scilex Holding Co. back to Scilex after a previous deal fell through at the last minute. Under the agreement, Scilex will pay Sorrento $110 million for the shares, with $5 million to be paid upfront. Hudson Bay Capital Management plans to finance the deal.
In addition, Scilex will cover approximately $12 million in legal fees that Sorrento owes to the law firm Paul Hastings. The deal is expected to close on September 19, according to court documents.
Scilex emerged as the successful bidder for the shares after an earlier deal with Oramed Pharmaceuticals Inc. fell through last month. Sorrento had considered suing to push through the sale but ultimately settled with Scilex after mediation, the company’s restructuring chief Mohsin Meghji said in a hearing on Tuesday.
“Our liquidity was tight – is tight – and it was critical that we complete the sale as quickly as possible,” Meghji said. As of Monday, the company had about $6.5 million in cash and is expected to run out of cash the following week, he added.
The value of its Scilex shares has fallen dramatically since it first filed for bankruptcy. On the filing date in February, the stock traded at a high of $9.50, bringing the total value of its holding to around $850 million. Seven months later, those stocks are down 74%.
Sorrento came under attack from short sellers in 2020 after its CEO touted on Fox News that the company had developed an antibody treatment “cure” for Covid-19. Famous short seller Hindenburg Research was among the firms that targeted the company in a report.
The case is Sorrento Therapeutics Inc. et al., 23-90085, in the United States Bankruptcy Court, Southern District of Texas (Houston).
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