Bailout

TheStreet stands up to Generex?s bullying

By Felix Salmon

Well done to Adam Feuerstein and TheStreet.com for standing up to egregious bullying from Generex, a small and smelly Canadian biotechnology company which has just filed a ridiculous $250 million lawsuit against them for libel. (To put that number in context, it’s roughly twice Generex’s market cap.)

The story begins on March 19, when Feuerstein wrote a “Biotech Stock Mailbag” column in which he explains why Generex “is a total bust”. Generex wasn’t happy about that, and they were even less happy about his March 26 follow-up, where he goes into a lot more detail about why he thinks Generex’s product is never going to get approval in the US. But there’s no libel here, Generex’s desperate attempts to find some notwithstanding:

The March 26 Article actually states a false legal conclusion that Generex has committed securities fraud under the Federal Securities Laws, when Feuerstein states “Yet even here, Generex plays stupid games aimed at misleading investors, something that totally undermines the legitimacy of the study.” Using the word “misleading” is not an opinion in this context but a conclusion that an SEC standard of fraud has been violated.

I love the word “actually” there — it’s as if Generex can invent a libel out of whole cloth just by asserting it to “actually” exist. Stating in an opinion column that a company is playing stupid games aimed at misleading investors is something that columnists do all the time. It’s not stating “a false legal conclusion”.

In any case, Feuerstein and TheStreet.com responded to the lawsuit in the best possible way — not by writing about it at all, but by publishing yet another column on Generex, this time detailing the way in which India revoked its approval of Generex’s product, without the revocation showing up anywhere in Generex’s SEC filings. It’s good, smart, hard-hitting reporting, and they should be applauded for not being cowed by this silly suit. Meanwhile, any investors still left in Generex might wonder why it’s pursuing expensive libel suits instead of engaging in a public and open way with its critics. It certainly doesn’t make the company look very good at all.

Full post as published by Macroprudential on April 06, 2010 (boomark / email).