Intelsat Action: “Core deficiencies remain”
April 3, 2023
The long-running Class Action against alleged Intelsat inside traders has seen a rebuttal submitted by the Defendants. They argue that the Plaintiffs have failed to make their case and has not made any plausible facts demonstrating that Intelsat obtained any material non-public information prior to the Defendants [sale of shares]. The rebuttal calls for the court to dismiss the Action.
The events that lead up to the claim state that on the morning of November 5th 2019, a meeting took place with Intelsat’s CEO Steve Spengler at the FCC to discuss Intelsat’s (and SES) C-band proposal for a private auction of some of the satellite company’s C-band assets over the US.
The Plaintiff’s Class Action cites precedence, and states: “Indeed, investors do not expect the playing field to be level, but they do expect that those who ‘have special access to information, because of employment or other relationships, should be barred from using that information to gain an advantage over the rest of us”,
The Plaintiff adds: “This is the quintessential insider trading case,” the lawsuit says. “Intelsat, a satellite operator, was successfully pursuing a bet-the-company-deal with the FCC. Its board chairman, defendant David McGlade, and its two largest shareholders, defendants BC Partners and Silver Lake, sold $246 million in stock, the very same day they learned the FCC was turning against the deal.”
The rebuttal filed to the court states: “Plaintiff’s claims against BC Partners [one of the key players in the Class Action claim] are only viable if it can plead
(i) that Intelsat learned material non-public information during a November 5, 2019, meeting about the FCC’s controversial pending decision on whether to conduct a public or private auction of C-Band spectrum;
(ii) that Intelsat then passed that information to BC Partners in the scant hours between the meeting and BC Partners’ trade; and
(iii) that the inference that BC Partners traded while in possession of material non-public information is at least as compelling as the inference that, in light of persistent and high-profile opposition to a private auction, BC Partners was already planning to reduce its stake in Intelsat once a trading window opened after Intelsat’s earnings announcement.
Plaintiff does not plead any of these necessary elements of its claims, let alone all of them.”
The Defendants’ 18-page document to the court says that the Plaintiffs in the case offer documents which offer nothing more than management’s subjective assessment of the political environment and risk surrounding the FCC’s decision at that time.
The Plaintiffs, in their March 5th filing, argued that: “Any reasonable person – and juror – would believe that there was insider trading”. The Action argues that the defendants in the case sold shares worth $246 million and thus avoid $185 million in losses but “innocent investors were left [with nothing]”. The Action states each of the named defendants “owed a fiduciary duty to Intelsat shareholders.”
The Action is due to be heard on April 28th.