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July 16 -- A shareholder of drugmaker CytRx Corp. is suing company directors and officers for issuing stock options immediately ahead of a major announcement concerning clinic trials.
Plaintiff shareholder David Johnson filed the derivative complaint July 15 in the Delaware Court of Chancery claiming that officers and directors breached their fiduciary duties of good faith and loyalty, causing unjust enrichment and waste of corporate assets.
According to the complaint, the board's compensation committee approved “spring-loaded” stock options for the company's directors and a handful of top executives, including President and Chief Executive Officer Steven A. Kriegsman, on Dec. 10, 2013. The approval came one day before the company announced to the public “highly positive top-line efficacy results” from a clinic trial of a new chemotherapeutic agent.
On Dec. 11, 2013, CytRx's stock price opened at $3.90, an increase of 63 percent from the previous day's closing price of $2.39, the complaint states. By the close of trading Dec. 11, 2013, the price closed at $4.02, which represents a full-day increase of 68 percent.
The stock price rose to a two-year high of $6.12 by Dec. 12, 2013, the complaint states.
According to the complaint, Kriegsman characterized the Dec. 10 announcement of the clinical trial results as “clearly the most important news in our Company's history,” during a conference call with investors and analysts.
Calls to Los Angeles-based CytRx for comment July 16 were not immediately returned.
During the company's June 24 annual shareholders meeting, Kriegsman and Marvin Selter were reelected to serve another term on the company's staggered board, according to an 8-K filing with the Securities and Exchange Commission.
Also, approximately 77 percent of the shares cast voted in favor on the company's compensation package for certain named officers, including Kriegsman.
The complaint is available at http://www.bloomberglaw.com/public/document/Johnson_David_vs_Louis_Ignarro_Docket_No_9884_Del_Ch_July_15_2014.
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