Avid Bioservices (CDMO) Quantifies Wrongful Accounting Due to Misclassification of $146 Million of 2026 Notes as Long-Term Liabilities – Hagens Berman
CDMO Investors with Substantial Losses Encouraged to Contact Hagens Berman, National Trial Attorneys
SAN FRANCISCO, April 25, 2024 (GLOBE NEWSWIRE) -- Hagens Berman urges Avid Bioservices, Inc. *(NASDAQ: CDMO)* investors who suffered substantial losses to submit your losses now.*Visit:* www.hbsslaw.com/investor-fraud/cdmo
*Contact An Attorney Now:* CDMO@hbsslaw.com *844-916-0895 *
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Avid Bioservices, Inc. (CDMO) Investigation:*Avid Bioservices, Inc. (CDMO) finds itself embroiled in an investigation into possible securities law violations after the company restated its financial performance for multiple quarters spanning 2022 and 2023.
After the markets closed on Apr. 24, 2024, Avid filed restated financials for its fiscal year ended Apr. 30, 2023. In so doing, Avid admitted that it understated current liabilities by about 141% and overstated net income by about 116%.
The heart of the matter lies in the misclassification of certain notes as long-term liabilities. Avid’s failure to accurately record additional interest expenses payable to note holders has raised serious questions about the company’s financial reporting practices. The spotlight is now on $143.8 million of 1.250% exchangeable senior notes due in 2026, known as the “2026 Notes.” These notes were privately placed with qualified institutional investors back in Mar. 2021.
The 2026 Notes come with a restrictive legend, effectively preventing purchasers from freely reselling them in the public marketplace unless the sale meets specific exemptions from the SEC’s registration requirements. The indenture governing the 2026 Notes mandated that Avid remove the restrictive legend by Mar. 17, 2022. Curiously, Avid continued to report the 2026 Notes on its balance sheet as long-term liabilities, despite the looming effects from its failure to remove the restrictive legend.
Investors first learned of the situation on Mar. 6, 2024, when Avid acknowledged its failure to remove the restrictive legend as required. Avid revealed that a holder of at least 25% of the 2026 Notes issued an acceleration notice, demanding immediate payment of “100% of the principal of, and accrued and unpaid interest on, the 2026 Notes.” The staggering amount involved—approximately $146 million—spooked investors.
To address this liquidity crisis, Avid unveiled plans to pay down the accelerated balance. The company secured $160 million through a private placement of 7% senior notes due in 2029. These notes are initially convertible into 101.1250 shares of Avid Biosciences’ common stock per $1,000 principal amount.
Then, on Apr. 24, 2024, Avid filed restated financials for its fiscal year ended Apr. 30, 2023, revealing that Avid had understated current liabilities by about 141%, understated net interest expense by nearly 7%, and overstated net income by about 116%.
“We’re investigating whether Avid Bioservices may have intentionally misled investors about its debt,” said Reed Kathrein, the Hagens Berman partner leading the investigation.
If you invested in Avid Bioservices and have substantial losses, or have knowledge that may assist the firm’s investigation, submit your losses now »
If you’d like more information and answers to frequently asked questions about the Avid Bioservices investigation, read more »
*Whistleblowers: *Persons with non-public information regarding Avid Bioservices Pharmaceuticals should consider their options to help in the investigation or take advantage of the SEC Whistleblower program. Under the new program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, call Reed Kathrein at *844-916-0895* or email CDMO@hbsslaw.com.
About Hagens Berman
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Contact:
Reed Kathrein, 844-916-0895