SFX CEO Robert Sillerman needs to focus on restructuring the company he forced into bankruptcy and doesn’t have time to deal with lawsuits from angry shareholders who say he mislead them and manipulated the value of the stock, according to a report from Dow Jones. Bankruptcy law generally prevents a company from being sued while going through a Chapter 11 filing, but the rule doesn’t apply to officers and executives at the company. Sillerman said the shareholder case is “an enormous distraction” and argued that SFX needs “all of their team focused on these chapter 11 cases right now [and] not producing documents, attending depositions and defending against a class action lawsuit.”
SFX and Mr. Sillerman are “facing a lawsuit from shareholders who claim that misleading statements drove up the company’s stock price,” explained Dow Jones. SFX “filed for bankruptcy protection earlier this month with a plan to execute a debt-for-equity swap with a group of bondholders owed $295 million. The deal will deleverage SFX’s balance sheet by $300 million. Unsecured creditors and equity holders aren’t slated to receive a recovery, but Mr. Sillerman will retain an equity stake in the reorganized company.”
SFX is facing at three lawsuits by shareholders who said Sillerman misled investors about efforts to take the company private and issued misleading statements to prop up the company’s free-falling stock. On Sept. 11, New York firm Abbey Spanier LLP filed a class action lawsuit, claiming investors were deceived “about Sillerman’s intent to acquire the company and suffered economic losses when the proposal lapsed and SFX’s share price plummeted,” according to an article in Billboard.
Two weeks later, a second class-action lawsuit was filed by Pennsylvania firm Kessler Topaz Meltzer & Check, claiming “SFX and certain executive officers made a series of materially false and misleading statements in connection with a proposed acquisition of SFX by Robert F.X. Sillerman,” according to a release. “Sillerman initiated and maintained a sham process designed to lure third party buyout offers for SFX, all in an attempt to shed his personal SFX investment before the truth about the deterioration of the Company’s finances could no longer be concealed.”
And in November, Lundin Law filed a third class action suit, alleging Sillerman “made misleading statements and/or failed to disclose a proposed acquisition of the company by SFX’s Chief Executive Officer and largest shareholder.”