Sorrento Therapeutics Inc., a firm working on a Covid-19 therapy once targeted by shortseller Hindenburg Research, filed for Chapter 11 bankruptcy after facing a $50 million legal judgment it couldn’t pay.
The US-listed company has estimated liabilities of between $100 million and $500 million, versus assets of at least $1 billion, according to a filing on Monday. Sorrento intends to keep operating during the bankruptcy.
Sorrento went bankrupt following a loss in an ongoing legal battle with a competitor and former business partner, according to Chief Restructuring Officer Mohsin Meghji. Lacking the cash to pay a $50 million judgment and afraid that its assets would be levied, the company sought Chapter 11 protection in order to work out a plan to repay creditors, Meghji said in court papers.
While Sorrento has only $5 million of cash on hand, it owns more than half of publicly traded Scilex Holding Co., a stake worth about $850 million as of Friday. Sale of the stock is currently restricted, but it could eventually be used to help repay all creditors in full and save its own stockholders from wipe-out, Meghji said.
Short Sellers
Short sellers from Hindenburg Research to Lakewood Capital earlier targeted the firm after its chief executive officer appeared on Fox News in May 2020 touting an antibody treatment as a “cure” for Covid-19.
Lakewood called Sorrento a firm “claiming to have the cure” for Covid-19. Hindenburg Research, whose allegations of malfeasance at Adani Group have led to a $127 billion wipeout in the Indian conglomerate’s stock market value, also published a report at the time urging caution.
Sorrento said in August 2020 that Hindenburg’s report contained “false and/or misleading statements for the sole apparent purpose of negatively manipulating” the stock price. The company would work with law enforcement and regulators to investigate and rectify any criminal activity, it said.
Adani Group has vigorously denied the American short seller’s allegations of accounting fraud and stock manipulation made last month.
In November of last year, Sorrento reported “positive topline results” from studies of standalone treatment for Covid-19.
The bankruptcy case is Sorrento Therapeutics Inc., 23-90085, U.S. Bankruptcy Court for the Southern District of Texas (Houston)
(Updates with additional context on bankruptcy filing beginning in first paragraph.)
--With assistance from Catherine Bosley and Christopher DeReza.
To contact the reporters on this story:
Ameya Karve in Singapore at akarve@bloomberg.net;
Jeremy Hill in New York at jhill273@bloomberg.net
To contact the editors responsible for this story:
Catherine Bosley at cbosley1@bloomberg.net
Kartik Goyal, Charles Penty
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