Scilex Holding Company Provides Notice to All Lenders of Short Positions in the Restricted Dividend Shares of Scilex Holding Company
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PALO ALTO, Calif., Oct. 04, 2023 (GLOBE NEWSWIRE) -- Scilex Holding Company (Nasdaq: SCLX, “Scilex” or “Company”), an innovative revenue-generating company focused on acquiring, developing and commercializing non-opioid pain management products for the treatment of acute and chronic pain, provides notice to all lenders of short positions of restricted shares of Scilex common stock that were part of the previously announced dividend of Scilex common stock then-held by Sorrento Therapeutics, Inc. (OTC: SRNEQ, “Sorrento”) to Sorrento equity holders of record as of January 9, 2023.
NOTICE TO ALL LENDERS OF SHORT POSITIONS IN RESTRICTED DIVIDEND SHARES
OF SCILEX HOLDING COMPANY
On December 30, 2022, Sorrento announced that its board of directors authorized Sorrento to dividend to Sorrento equity holders of record as of January 9, 2023 an aggregate of 76,000,000 shares of common stock of Scilex that were then-held by Sorrento (“Scilex Dividend Stock”). The Scilex Dividend Stock was distributed on or about January 19, 2023 and since such date has been subject to restrictions on transfer which are currently in place through March 31, 2024. The Scilex Dividend Stock was primarily received by “record holders,” or brokers, dealers, banks and other nominees acting as agents for shareholders who are the true “beneficial owners” of the Scilex Dividend Stock.
On February 13, 2023, Sorrento and certain of its related entities (collectively “Debtors”), which did not include Scilex, commenced voluntary proceedings under Chapter 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Chapter 11 proceedings are jointly administered under the caption In re Sorrento Therapeutics, Inc., et al. (“Bankruptcy Proceedings”).
According to Sorrento’s estimates, approximately 8.4 million or more shares of Scilex Dividend Stock were deemed to have been sold “short” as of the Payment Date as a result of the “short” positions of the underlying Sorrento common stock. “Naked short” sales or “naked short” positions in any Scilex common stock may constitute a violation of SEC Regulation SHO.
On June 12, 2023, the Official Committee of Equity Securities Holders of the Debtors (“Equity Committee”) commenced an adversary proceeding in the Bankruptcy Proceedings by filing a complaint against certain brokerage firms seeking entry of a temporary restraining order and preliminary injunction related to the defendants’ allowance and facilitation of illegal naked short selling of Scilex Dividend Stock. On June 14, 2023, the Bankruptcy Court entered a temporary restraining order temporarily suspending all short sales of Scilex Dividend Stock and ordering the defendants to provide an accounting of all profits received from the naked short selling of Scilex Dividend Stock and Scilex common stock, including all interest charged to short sellers, no later than five business days after entry of the order. On July 18, 2023, the Bankruptcy Court then granted the joint emergency motion filed by the Debtors and the Equity Committee for an order (i) approving and authorizing the Debtors to consummate an offering of shares of Scilex common stock held by the Debtors, (ii) authorizing entry into settlement agreements with participating record holders of Scilex common stock who opt into a settlement, and (iii) granting related relief. This emergency motion was very successful, resulting in settlements reached with dozens of short sellers and approximately 800,000 Scilex common stock, purchased from the open market, short positions closed or covered.
While certain parties with short positions in the Scilex Dividend Stock (“Short Sellers”) settled with the Debtors and Scilex in the Bankruptcy Proceedings as described in the paragraph immediately above, a number of Short Sellers who engaged in illegal naked short selling or violated the terms of the transfer restrictions imposed on the Scilex Dividend Stock did not elect to opt into a settlement. Before taking any further legal action against such Short Sellers, on October 3, 2023, Scilex provided a proposal to those Short Sellers who had not yet closed or covered their respective short positions in Scilex Dividend Stock (“Short Seller Proposal”). As Scilex noted in its October 3, 2023 press release containing the Short Seller Proposal, Scilex believed that since the settlements reached with certain Short Sellers via the emergency motion described above were deemed successful, with no objections from the participating Short Sellers and with widespread support and assistance from such Short Sellers’ brokers and/or agents, there should be no further excuses for continuing to hold the short positions in Scilex. Therefore, the Short Seller Proposal allowed those Short Sellers to cover their short positions and avoid any continuing fees, interest, and other expenses associated with any short positions, as well as one last opportunity to accept the terms provided in the Bankruptcy Proceedings in order to obtain a release from Scilex for any claims and causes of action related to naked short selling or other similar market manipulative behavior. On October 3, 2023, Scilex notified all Record Holders of the Short Seller Proposal via email and express mail.
Scilex is now making a similar offer to the lenders of the short positions in Scilex Dividend Stock held by the Short Sellers (“Lender”). Specifically, under this “Lender Proposal,” (i) any Lender that requires the immediate return of Scilex Dividend Stock that was loaned to Short Sellers, and (ii) once the applicable Short Sellers have closed out such short positions in the Scilex Dividend Stock, Scilex will provide a release of any claims and causes of action related to naked short selling or other similar market manipulative behavior. Such release will be provided after Scilex receives written confirmation of the above two actions.
Any Lender that wishes to participate in this Lender Proposal can contact Stephen Ma at Scilex (SMa@scilexholding.com). In exchange for accepting this Lender Proposal and engaging in the actions described herein, the Lender shall receive releases from Scilex for any claims and causes of action that Scilex may have relating to naked short selling to the extent of the amount of the short position held by the Short Seller who borrowed the Lender’s shares of Scilex Dividend Stock. The Lender should notify the Short Sellers to follow the same procedures outlined in the October 3, 2023 Short Seller Proposal. This Lender Proposal shall commence on October 9, 2023 and continue to and end on October 31, 2023.
THE DEADLINE TO ACCEPT THIS LENDER PROPOSAL IS OCTOBER 31, 2023.
IN CONNECTION WITH ANY STOCK TRANSACTIONS AND THE PROVISION OF ANY RELEASE BY SCILEX CONTEMPLATED UNDER THE LENDER PROPOSAL, THE FOLLOWING RESTRICTIVE LEGEND WILL BE IMPOSED ON SHARES OF SCILEX COMMON STOCK USED TO CLOSE OR COVER THE SHORT POSITION: THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, PLEDGED, HYPOTHECATED, LOANED, ENCUMBERED OR OTHERWISE DISPOSED OF WITHOUT THE CONSENT OF SCILEX HOLDING COMPANY (THE “COMPANY”) PRIOR TO MARCH 31, 2024. A TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE DEEMED TO INCLUDE, WITHOUT LIMITATION, THE (A) SALE OR ASSIGNMENT OF, OFFER TO SELL, CONTRACT OR AGREEMENT TO SELL, GRANT OF ANY OPTION TO PURCHASE OR OTHERWISE DISPOSE OF OR AGREEMENT TO DISPOSE OF, DIRECTLY OR INDIRECTLY, OR ESTABLISHMENT OR INCREASE OF A PUT EQUIVALENT POSITION OR LIQUIDATION WITH RESPECT TO OR DECREASE OF A CALL EQUIVALENT POSITION WITHIN THE MEANING OF SECTION 16 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”), WITH RESPECT TO, ANY SECURITY OF THE COMPANY, (B) ENTRY INTO ANY SWAP OR OTHER ARRANGEMENT THAT TRANSFERS TO ANOTHER, IN WHOLE OR IN PART, ANY OF THE ECONOMIC CONSEQUENCES OF OWNERSHIP OF ANY SECURITY OF THE COMPANY, WHETHER ANY SUCH TRANSACTION IS TO BE SETTLED BY DELIVERY OF SUCH SECURITIES, IN CASH OR OTHERWISE, AND (C) ENGAGEMENT, WHETHER DIRECTLY OR INDIRECTLY, IN ANY (I) “SHORT SALE” (AS SUCH TERM IS DEFINED IN RULE 200 OF REGULATION SHO OF THE EXCHANGE ACT) OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR (II) HEDGING TRANSACTION, WHICH ESTABLISHES A NET SHORT POSITION WITH RESPECT TO ANY SECURITIES OF THE COMPANY (INCLUDING THE COMMON STOCK OF THE COMPANY), WITH RESPECT TO EACH OF CLAUSES (I) AND (II) HEREOF, EITHER FOR THE HOLDER’S OWN PRINCIPAL ACCOUNT OR FOR THE PRINCIPAL ACCOUNT OF ANY OTHER PERSON.
About Scilex Holding Company
Scilex Holding Company is an innovative revenue-generating company focused on acquiring, developing and commercializing non-opioid pain management products for the treatment of acute and chronic pain. Scilex is uncompromising in its focus to become the global pain management leader committed to social, environmental, economic, and ethical principles to responsibly develop pharmaceutical products to maximize quality of life. Results from the Phase III Pivotal Trial C.L.E.A.R. Program for SEMDEXA™, its novel, non-opioid product for the treatment of lumbosacral radicular pain (sciatica), were announced in March 2022. Scilex participated in the type C meeting for purposes of pre-NDA discussion with the FDA and is pending official minutes in writing from the FDA. Scilex targets indications with high unmet needs and large market opportunities with non-opioid therapies for the treatment of patients with moderate to severe pain. Scilex launched its first commercial product ZTlido® in October 2018, in-licensed a commercial product Gloperba® in June 2022, and launched its third FDA-approved product Elyxyb™ in April 2023. It is also developing its late-stage pipeline, which includes a pivotal Phase 3 candidate, and one Phase 2 and one Phase 1 candidate. Its commercial product, ZTlido® (lidocaine topical system)
Scilex Holding Company is headquartered in Palo Alto, California.
Forward-Looking Statements
This press release and any statements made for and during any presentation or meeting concerning the matters discussed in this press release contain forward-looking statements related to Scilex and its subsidiaries under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Forward-looking statements include statements regarding the anticipated timing for completion of the Lender Proposal and procedures for participating in the Lender Proposal and executing a release agreement, Scilex’s belief that it is well positioned to continue its growth over the next several years, Scilex’s long-term objectives and commercialization plans, Scilex’s potential to attract new capital, future opportunities for Scilex, Scilex’s future business strategies, the expected cash resources of Scilex and the expected uses thereof; Scilex’s current and prospective product candidates, planned clinical trials and preclinical activities and potential product approvals, as well as the potential for market acceptance of any approved products and the related market opportunity; statements regarding ZTlido®, Gloperba®, ELYXYB®, SP-102 (SEMDEXA™), SP-103 or SP-104, if approved by the FDA; Scilex’s development and commercialization plans; and Scilex’s products, technologies and prospects.
Risks and uncertainties that could cause Scilex’s actual results to differ materially and adversely from those expressed in our forward-looking statements, include, but are not limited to: risks associated with the unpredictability of trading markets and whether a market will be established for Scilex’s common stock; general economic, political and business conditions; risks related to the ongoing COVID-19 pandemic; the risk that the potential product candidates that Scilex develops may not progress through clinical development or receive required regulatory approvals within expected timelines or at all; risks relating to uncertainty regarding the regulatory pathway for Scilex’s product candidates; the risk that Scilex will be unable to successfully market or gain market acceptance of its product candidates; the risk that Scilex’s product candidates may not be beneficial to patients or successfully commercialized; the risk that Scilex has overestimated the size of the target patient population, their willingness to try new therapies and the willingness of physicians to prescribe these therapies; risks that the outcome of the trials for SP-103 or SP-104 may not be successful; risks that the prior results of the clinical trials of SP-102 (SEMDEXA™), SP-103 or SP-104 may not be replicated; regulatory and intellectual property risks; and other risks and uncertainties indicated from time to time and other risks set forth in Scilex’s filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and Scilex undertakes no obligation to update any forward-looking statement in this press release except as may be required by law.
Contacts:
Investors and Media
Scilex Holding Company
960 San Antonio Road
Palo Alto, CA 94303
Office: (650) 516-4310
Email: investorrelations@scilexholding.com
Website: www.scilexholding.com
SEMDEXA™ (SP-102) is a trademark owned by Semnur Pharmaceuticals, Inc., a wholly-owned subsidiary of Scilex Holding Company. A proprietary name review by the FDA is planned.
ZTlido® is a registered trademark owned by Scilex Pharmaceuticals Inc., a wholly-owned subsidiary of Scilex Holding Company.
Gloperba® is the subject of an exclusive, transferable license to use the registered trademark by Scilex Holding Company.
ELYXYB® is the subject of an exclusive, transferable license to use the registered trademark by Scilex Holding Company.
All other trademarks are the property of their respective owners.
© 2023 Scilex Holding Company All Rights Reserved.
