Could the lawsuit result in a leadership or board change at PepGen? | PEPG (Aug 07, 2025) | Candlesense
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Could the lawsuit result in a leadership or board change at PepGen?

Short answer:

Yes – a securities‑fraud class action such as the one being organized by the Schall Law Firm can lead to changes in PepGen’s leadership or board, although the news release does not spell out a specific removal or replacement. The possibility hinges on how the case is resolved (e.g., settlement terms, court‑ordered relief, or a judgment) and on the pressure that a high‑profile lawsuit places on the company’s governance.

Why a securities‑fraud lawsuit can trigger leadership or board changes

Legal basis Typical corporate‑governance consequences
Section 10(b) of the Securities Exchange Act (and Rule 10b‑5) prohibits fraudulent statements or omissions in connection with the purchase or sale of securities. If a court finds that executives or directors materially misled investors, they may be held liable for damages. Courts sometimes order “director‑removal relief” (e.g., a “blue‑sky” injunction that bars the same individuals from serving as officers or directors in the future).
Section 20(a) of the Securities Exchange Act (the “anti‑trust‑by‑contract” provision) bars agreements that restrict the ability of shareholders to bring class‑action suits. Violations can expose the company to “derivative‑action” claims and can make the board’s past approvals of the alleged scheme subject to scrutiny. A finding of “bad‑faith” conduct by the board can lead to shareholder votes to replace directors.
Shareholder‑rights litigation (the specialty of the Schall Law Firm) The firm’s involvement signals that investors are organized and may be prepared to elect new directors at the next annual meeting or to press for board resignations as part of a settlement.

How the PepGen case could evolve toward a leadership/board change

  1. Settlement with governance provisions

    • Many securities‑fraud settlements include “covenants” that require the company to restructure its board, appoint independent directors, or remove specific officers who were implicated in the alleged misconduct.
    • Because the Schall Law Firm is inviting investors to lead the case, the settlement negotiations could be steered toward stronger governance reforms—something investors often demand in exchange for dropping the lawsuit.

  2. Court‑ordered relief

    • If the case proceeds to trial and a judge finds PepGen liable for violating §§10(b) or 20(a), the court can issue an injunction that bars the implicated individuals from serving as officers or directors in the future.
    • The court could also order reconstitution of the board (e.g., appointing a majority of independent directors) as part of the remedial relief.

  3. Shareholder pressure and proxy contests

    • Even without a formal court order, the publicity of a class‑action lawsuit can embolden dissident shareholders to file proxy‑candidates or demand a re‑election of the board at the next annual meeting.
    • The fact that the Schall Law Firm is a “national shareholder‑rights litigation firm” suggests that it may help organize a coordinated proxy campaign to replace directors who are perceived as responsible for the alleged securities violations.

  4. Potential for a “derivative” or “crown‑coup” scenario

    • If the alleged misconduct is severe enough (e.g., intentional misstatements that materially inflated the stock price), shareholders might bring a derivative suit seeking to recover damages and remove the directors who approved the fraud.
    • While the current filing is a class‑action under §§10(b) and 20(a), the same factual allegations could be cross‑leveraged in a derivative action, which traditionally ends with board changes.

What the news release actually says (and what it does not say)

What the release mentions What it does not mention
• PepGen is alleged to have violated § 10(b) (fraudulent statements) and § 20(a) (anti‑trust‑by‑contract) of the Securities Exchange Act.
• The Schall Law Firm is mobilizing investors to lead the class‑action.		 • No explicit statement that the lawsuit demands removal of any specific officer or director.
• No mention of a settlement‑negotiation that includes board‑restructuring provisions.
• No reference to a court‑ordered injunction or a proxy‑contest already filed.

Thus, the release does not guarantee a leadership change, but it sets the stage for one.

Bottom‑line assessment

Likelihood Rationale
High that the lawsuit will create pressure for governance reform. Securities‑fraud class actions often culminate in settlements that require board changes, and the involvement of a shareholder‑rights firm signals an intent to pursue those reforms.
Moderate that a court will order director removal or a settlement will explicitly require it. The outcome depends on the strength of the plaintiffs’ case, the willingness of PepGen to settle, and whether the court finds the alleged conduct “bad‑faith” enough to merit injunctive relief.
Low to moderate that a specific individual will be forced out immediately. No current filing or public statement names a particular executive or director as the target of removal; any change would likely be contingent on later settlement negotiations or a court decision.

Therefore, while the lawsuit does **not automatically guarantee a leadership or board change at PepGen, it creates a credible pathway—through settlement terms, court‑ordered relief, or heightened shareholder activism—that could result in such changes.**

Other Questions About This News

What is the estimated exposure or liability for PepGen if the class action proceeds to trial or settlement? How does this lawsuit compare to similar securities‑fraud cases in the biotech/medical‑device sector in terms of outcomes and settlements? Could the lawsuit trigger any credit rating downgrades or covenant breaches for PepGen’s existing debt? How might the lawsuit affect analyst coverage, target price revisions, or institutional ownership of PepGen? What is the likelihood that the case will be settled early versus going to a jury trial? What impact could this litigation have on PepGen's ability to raise capital or pursue the $30 M of financing it recently announced? Are there any insider trades or insider sales that have increased since the filing of the lawsuit? What are the potential impacts on PepGen’s pipeline and product development timelines? How might this lawsuit affect PepGen’s relationships with key customers, partners, or suppliers? How will the lawsuit settlement or potential damages affect PepGen's short‑term stock volatility? What is the timeline for the litigation and any upcoming court filings or deadlines?