Lower Court ‘Improperly Weighed’ Scienter in Intelsat Insider Trading Case: Opening Brief

“Any reasonable person” would conclude that five Intelsat defendants, including former Chairman David McGlade and Intelsat’s two largest shareholders, engaged in unlawful insider trading while in possession of materially nonpublic information, alleged lead plaintiff Walleye Group in its opening brief Friday (docket 23-15822) in the 9th U.S. Circuit Court of Appeals. Walleye is seeking reversal of the district court’s April 26 dismissal of its second amended complaint. Walleye alleges the defendants sold more than $245 million of Intelsat stock the evening after they learned the FCC was going to reject Intelsat's “bet-the-company plan” for a private auction of satellite spectrum, which Intelsat previously believed the FCC would support (see 2305310058). Intelsat’s shares “collapsed” by 77% when the public found out about the FCC’s rejection, said Walleye’s opening brief. The defendants thereby avoided over $185 million in losses by selling their Intelsat stock in a late-evening fire sale, it said. As a result of the doomed deal, Intelsat filed for bankruptcy, it said. The case “involves one issue, and one issue alone” -- whether Walleye adequately alleged the scienter element of its insider trading claims, the brief said. The U.S. District Court for the Northern District of California “not only incorrectly weighed the collective inferences of scienter present here, but also improperly weighed such inferences through a clouded lens,” it said.