NeoMedia majority debt holder sued for unlawful short-swing trading
NeoMedia shareholder William Klawoon is suing the company?s principal investor and majority debt holder Yorkville Advisors.
In January Mr. Klawoon wrote a letter to Neo Media demanding that the company sue Yorkville for not reporting profits from short-swing trading.
?[Yorkville] has fared quite well from its ?investment? in NeoMedia having purchased over $50 million in NeoMedia securities and made untold millions in profits,? the lawsuit filing says.
Here is the letter the shareholder wrote to NeoMedia in January:
A derivative suit was filed by Mr. Klawoon on behalf of NeoMedia in order to recover the short-swing profits made by Yorkville.
According to Wikipedia, a shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party.
Shareholder derivative suits are unique because under traditional corporate law, management is responsible for bringing and defending the corporation against suit. Shareholder derivative suits permit a shareholder to initiate a suit when management has failed to do so.
The complaint demands that Yorkville payback all profits made by Yorkville in NeoMedia stock since 2004, directly to NeoMedia.
NeoMedia declined to comment on this lawsuit.
Calls to Yorkville were not returned.
Yorkville has 21 days from the time it was first served the summons to respond to the shareholder?s complaint.
Here is a screen grab of the summons:
If the company fails to respond, it will result in a default judgment and Yorkville will be responsible to pay the relief amount that is demanded by Mr. Klawoon.
?[Yorkville] earned a profit from its short-swing trading (i.e., trades in which sales occurred within six months of purchase) activity in the common stock by purchasing shares of common stock for less than the price at which shares of common stock were sold within a corresponding six month period,? the filing says.
?The precise amount of such profits is not yet known because [Yorkville] failed to report its transactions in the forms required to be filed with the SEC pursuant to Section 16(a) of the Exchange Act,? it says.