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Biotech Company Sues theStreet For Slander, Felix Salmon Has An Opinion

Tyler Durden's picture




 

Cramer just can't catch a break these days: SEC investigations, plunging ratings, and now, adding insult to injury, a lawsuit filed by Generex Biotech which seeks $250,000,000 from TheStreet and Adam Feuerstein in damages for business defamation, product disparagement, and injurious falsehood. The reason for the lawsuit are this and this Op-Eds by Adam Feuerstein. Among the quotes used by Feuerstein: "I think Generex is a total bust" and "As I burrow into Generex, it becomes apparent almost immediately that the company is using science and the quest to develop an alternative insulin delivery method not to actually help diabetics but as a ruse to perpetuate a 15 year-long stock promotion scheme." We are not sure where opinions end and libel (or is that slander) begins, but this one may be a close call. Especially if Adam's statements are groundless. But that will be up to a jury to decide. 

As part of its press release, Generex states the following:

"These articles go well beyond the expression of disparaging opinion or fair comment," said Mark Fletcher, Generex's Executive Vice-President & General Counsel. "Feuerstein and TheStreet.com have abused their public forum by spreading categorical falsehoods about Generex and Generex Oral-lyn(TM) when a modicum of due diligence would have revealed the truth, an injury then compounded by unfounded and libelous allegation and innuendo. We are now seeking to hold Feuerstein and TheStreet.com accountable for the damage they have unjustifiably inflicted on Generex and its stockholders."

A settlement is likely in the works (theStreet's recent phenomenal results, Adjusted EBITDA and all, should afford it the cash to pay out related legal fees). Yet it is the fringe noise around this development that is most interesting. Seeking Alpha has written an extensive article defending Generex (to be sure, by an author who is most likely conflicted as disclosed by his long GNBT position). Yet we were surprised to see Felix Salmon's involvement in this most recent media fiasco. As a reminder Felix was most recently seen having an extensive and very much thoroughly useless debate with Henry Blodget telling the former stock analyst how to best run his business. Last time we checked Blodget was getting multi-million Series X valuation rounds for his creation, so for the time being we are confident that Henry does not need the advice of bloggers who need the scaffolds of mega mainstream media in order to receive compensation for their musings.

In a column titled, TheStreet stands up to Generex’s bullying, Salmon writes :

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.)

We are confused how exactly theStreet has stood up to anything, especially egregious anything, because as Salmon himself notes further down his column:

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.

Unless Salmon is all of a sudden an expert on developmental stage biotechs, he may wish to consider a little more prudence in this particular case. Especially when he concludes with the following: "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."

Well, in fact Generex did do just that, by issuing a press release a few days earlier, highlighting just what it thought was wrong with the original Feuerstein piece (extract below):

Generex Biotechnology Corporation (Nasdaq:GNBT - News) (www.generex.com) has demanded a retraction of and apologies for the inaccuracies in an online article published to TheStreet.com on March 19. In an entry titled "Biotech Stock Mailbag: Generex," TheStreet.com columnist Adam Feuerstein makes erroneous claims about Generex and its flagship product Generex Oral-lyn(TM), an oral insulin spray currently in Phase III clinical trials for the treatment of Type I and Type II diabetes. Generex also wishes to correct the public record by making clear the facts as outlined in the letter to TheStreet.com's counsel.

It seems like a rather fair warning to us. Not only that, but this release forced Feuerstein to add the following correction to this article:

Correction: In an earlier version of this article, the name of
Generex' Oral-lyn was misspelled. It has been corrected. We'd also like
to note that Oral-lyn has been discussed in medical journals and
presented at medical association meetings over the last ten years.
TheStreet.com regrets the error.

Therefore, we are a little confused by just what the whole point of Salmon's essay is. On the other hand, if Felix were to surprise us and come out with a 50 page analysis of just how Generex is indeed a fraud, thereby validating Adam's claims, then we would concede that this development does indeed merit something more than an observation that so far theStreet has not even acknowledged the lawsuit (just as it took theStreet about 3 hours after Zero Hedge first disclosed the site's recent entanglement  with the SEC). Furthermore, instead of taking the indignant moral high ground, perhaps Salmon can also dissect the critique of R.J Steffens (who at least notes his bias... and by the way, nobody within a mile of Zero Hedge HQ has ever smelled one share of Generex): who knows - maybe Salmon will come to the conclusion that this is yet more "good, smart, hard-hitting reporting" and will blog about it as well. At the end of the day, quotas are quotas, and eyeballs (however many) must be satisfied.

We, on the other hand, will be curious to see what objective developments arise out of this legal case (we have had our share of being critial of companies... in this case $10 billion EV ones, and somehow never got sued for it - the reason being all our claims were based on pure facts), but also what information the SEC uncovers, once it is done going thru theStreet's books.

 

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Tue, 04/06/2010 - 20:27 | 289203 Critical Path
Critical Path's picture

"The house of painnnn................."

........"sell sell sell"

Tue, 04/06/2010 - 20:38 | 289209 repete
repete's picture

I think the jury would like to see this classic.

http://www.youtube.com/watch?v=gMShFx5rThI

Tue, 04/06/2010 - 20:43 | 289216 Captain Willard
Captain Willard's picture

The clinical trials will speak for themselves, won't they? Meanwhile, if he has a point, why doesn't Adam limit himself to a critique of the Phase II trials?

Hyperbole is the refuge of the logically challenged.

Tue, 04/06/2010 - 21:07 | 289237 OSR
OSR's picture

It's good to see that I'm not the only one who pegged Felix Salmon as a practicing douchebag.

Tue, 04/06/2010 - 21:08 | 289238 albion402
albion402's picture

How long can Cramer last?

Tue, 04/06/2010 - 21:23 | 289249 jory
jory's picture

This is clearly opinion and the lawsuit is groundless.  Makes Generex look real bad and I think Adam is right. 

Tue, 04/06/2010 - 22:28 | 289307 E pluribus unum
E pluribus unum's picture

Adam has been Carl Icahn's bitch for so long he can't even spell "journalist" anymore. If you want to see why he hammered Generex try looking at what Icahn interests were threatened if they were successful.

Tue, 04/06/2010 - 23:37 | 289353 Nihilarian
Nihilarian's picture

Let me get this straight; a worthless Biotech is sueing theStreet.com. Meanwhile, even after this Biotech's stock got halved, its market cap is still higher than theStreet's. This is about as anticlimactic as a drug dealer calling the cops to report that his drugs got stolen -- good luck with that!

 

Wed, 04/07/2010 - 01:36 | 289448 rebeltraders
rebeltraders's picture

Generex is a penny stock for christ sake. Generex is concerned about the article doing harm to their shareholders... LOL

I think the company has harmed the shareholders just fine all by themselves.

 

Wed, 04/07/2010 - 06:57 | 289501 BoeingSpaceliner797
BoeingSpaceliner797's picture

Wow!  This is straight out of Deep Capture so I am thinking along the lines of "where there's smoke, there's fire."  Good luck Generex.  If Deep Capture is correct, you have almost zero chance in this lawsuit.

Fri, 04/23/2010 - 20:51 | 289510 Mercury
Mercury's picture

I doubt it's in ZH's best interest for Cramer to lose a slander case of this nature in court.

Wed, 04/07/2010 - 08:13 | 289522 Captain Willard
Captain Willard's picture

The clinical trials and science speaks for itself, doesn't it?

Why don't these pundits limit their comments to relevant subjects?

Wed, 04/07/2010 - 10:52 | 289657 hedgie
hedgie's picture

Adam Feuerstein is performing a necessary and useful service.  Promotional biotech companies lie about their trials and their communications with the FDA, and they take money away from retail investors who are not equipped to dig for the truth.  If Adam happens to be wrong, management should be happy about the press attention the dispute will generate, and they have every opportunity to respond on their own web site and in other forums.  But the lawsuit suggests very strongly that Feuerstein is right about the company.

Fri, 04/09/2010 - 03:42 | 292770 mark456
mark456's picture

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Fri, 04/23/2010 - 20:51 | 315731 Mercury
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