Synergy Pharmaceuticals Accused of Taking Out Large Loan at Shareholders' Expense

According to the complaint, on September 5, 2017, Synergy Pharmaceuticals Inc. (SGYP) announced that it closed on a $300 million senior secured loan from CRG Partners III L.P. Synergy said the loan was non-dilutive and would give the company the ability to launch its drug, Trulance, and achieve its business objectives, which it was confident would maximize long-term shareholder value and fund the company's plans through 2019. Consequently, investors were under the impression that Synergy would successfully develop and profit from Trulance without needing to raise additional capital or dilute stockholders' outstanding equity interests. The CRG loan, however, had critical undisclosed terms and conditions that prevented Synergy from accessing funds "when needed." As a result, in order to fund its operations, on November 14, 2017, Synergy conducted a secondary offering of approximately 22 million shares for net proceeds of $52.4 million. The 10% dilutive capital increase was described by investors as "unexpected," "blindsiding," and stoked "fears about further unexpected dilution."