Enzo Biochem, Inc. under investor investigation over its stock option practice

Aug. 11, 2010 - PRLog -- An investigation on behalf of current long term investors of Enzo Biochem, Inc.  over possible breaches of fiduciary duty and other violations of the law by certain officers and directors at Enzo Biochem.

If you are a current long term investor in Enzo Biochem, Inc. , and/or have information relating the investigation, you have certain options and you should contact the Shareholders Foundation, Inc by email mail@shareholdersfoundation.com or call +1(858) 779 – 1554.

Enzo Biochem, Inc., located in New York, is a life sciences and biotechnology company focused on harnessing biological processes to develop research tools, diagnostics and therapeutics and on serving as a provider of diagnostic services to the medical community. The investigation by a law firm concerns whether certain of Enzo Biochem's directors and officers breached their fiduciary duties through the manipulation of stock option grant dates with the goal of secretly maximizing profits from the stock options, a practice commonly referred to as "backdating." According to the investigation certain of Enzo Biochem's stock option grants to officers and directors were priced at or near the lowest closing price for the month, quarter, and/or year. A stock option is granted to employees of a company and carries the right, but not the obligation, to buy a certain amount of shares in the company after a specified amount of time at a predetermined price called the “exercise price.”  Typically, the exercise price of a stock option is the same as the closing price of shares of the company’s stock on the date on which the option is granted.  Accordingly, the lower the exercise price, and the higher the price of the company stock on the date on which the option is exercised, the more valuable the stock option becomes.  Because the option value is higher if the exercise price is lower, executives prefer to be granted options when the stock price is at its lowest.  By backdating the stock option grant dates, executives are able to choose a past date when the market price was particularly low, thereby inflating the value of the options.  

Enzo Biochem shares (ENZ) rose from as low as $9.63 per share in early 2006 to $18.01 per share in mid 2007. ENZ shares lost from the 2007 high in 2008 before rising to the 2008 high of $14.50 per share. Since the $14.50 mark ENZ shares fell in the end of 2008 to as low a $4.66 per share in December 08. In 2009 ENZ shares traded as low as $3.08 per share, less then 20% of the 2006 High-value. ENZ shares gained value throughout 2009 and traded as high as $7.37 per share in fall 2009. Recently ENZ were almost back to their 2009 lowest trading and traded under $4 per share.
The practice of granting an employee stock option that is retroactively dated to increase its value raises a number of legal and accounting issues, so the investigation, and “the practice of backdating itself is not illegal, nor is granting of discounted stock options”, but “what is illegal is the improper disclosures in financial records and in filings with the United States Securities and Exchange Commission”.  The failure to disclose a compensation expense with the retroactive option grants is a violation of U.S. accounting rules as options backdating effectively transfers wealth from existing shareholders to management, so the investigation.
Enzo Biochem’s Total Revenue increased over the past four years from $39.83million in 2006, to $52.91million in 2007, to $77.80million in 2008, and $89.57million in 2009. Nevertheless its Net Loss increased over the same time frame from a Net Loss of $15.67million in 2006 to a Net Loss of $23.56million in 2009.

Those who are current long term investors in Enzo Biochem, Inc. (Public, NYSE-ENZ), and/or have information relating the investigation, have certain options and should contact the Shareholders Foundation, Inc by email mail@shareholdersfoundation.com or call +1(858) 779 – 1554.

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The Shareholders Foundation, Inc. is an investor advocacy group. We do research related to shareholder issues and inform investors of securities class actions, settlements, judgments, and other legal related news to the stock/financial market. At Shareholders Foundation, Inc. we are in contact with a large number of shareholders. We believe that together we can combine the interests of many investors, and use the size of our interest as leverage against the giant corporations. We offer help, support, and assistance for every shareholder. We help investors find answers to their questions and equitable solutions to their problems. The Shareholders Foundation, Inc. is not a law firm. The information is provided as a public service. It is not intended as legal advice and should not be relied upon.