Last week, in Hanna v. Paradise and Skillz Inc., (Del. Ch.; 7/25), the Delaware Chancery Court refused to dismiss insider trading allegations against corporate insiders arising out of their sales of company stock in a public offering conducted during a blackout period. mandated by the company’s insider trading policy. The plaintiff alleges that the company failed to disclose material negative information about its performance of which the board was aware until after the offering, which permitted insiders to sell their shares in the offering at an inflated price.

This case doesn’t involve a 10b-5 claim; instead, it’s a so-called “Brophy claim” alleging that the defendants’ actions involved a breach of fiduciary duty. The lawsuit was filed as a derivative action, so this decision focuses on issues like demand futility and director independence and does not address the substance of the plaintiff’s allegations. Chancellor McCormick declined to dismiss the case, so the possibility exists that she may address some of the more interesting issues raised by the case in subsequent proceedings.

Even if the Chancellor doesn’t address those issues, the case gives me an excuse to plug our upcoming “Securities Offerings During Blackout Periods” webcast – which I assure you will focus on the substantive issues surrounding a decision to move forward with a public offering during a blackout period.

– John Jenkins