In a rare trial in a securities class action lawsuit, a federal jury has ruled that hedge fund Armistice Capital and certain of its executives had not, as the plaintiffs alleged, committed insider trading or engaged in a pump-and-dump scheme in selling over $200 million in vaccine company Vaxart stock during the COVID-19 pandemic. The jury specifically held that the plaintiffs had not proven that the defendants had engaged in a scheme to defraud and had not proven their insider trading allegations.

The April 28, 2026, verdict form in the case can be found here. Law360’s April 28, 2026, article about the verdict can be found here.

Background

Vaxart was (and is) a vaccine development company. By October 2019, hedge fund Armistice Capital (and related entities) had acquired 65.2% ownership of Vaxart, having purchased the shares at prices between 33 cents and 37 cents per share.

In early 2020, the company’s shares began to climb following company statements about its efforts to develop a COVID-19 vaccine.

On June 25, 2020, the company issued a press release announcing that it had entered into an agreement to enable the production of one billion or more COVID-19 vaccine doses annually. The company’s share price doubled on the announcement, from $3.61 per share to $6.26 per share.

On June 26, 2020, the company issued another press release stating that Vaxart’s vaccine had been selected for the U.S. government’s “Operation Warp Speed” (a government initiative to encourage the development of a COVID-19 vaccine). This announcement caused the company’s share price to rise to a high of $14.30.

Between June 26 and June 29, 2020, the securities lawsuit complaint alleged, Armistice sold over 27.6 million Vaxart shares, reaping profits of approximately $200 million.

As discussed here, in August 2020, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of California against the company; certain of its executive officers; and Armistice, related entities, and certain of its executives. After the plaintiffs’ complaint survived a motion to dismiss as to the company and the company’s executives, the plaintiffs settled with the company defendants for approximately $12 million.

The case went forward as to the Armistice defendants – Armistice Capital LLC, Armistice Capital Master Fund Ltd., Armistice founder Steven Boyd, and Keith Maher, Armistice’s managing director. The plaintiffs alleged and sought to prove that the Armistice defendants relied on supposedly false Vaxart press releases in order to be able to sell Armistice’s Vaxart shares at inflated prices. The plaintiffs also alleged that Boyd and Armistice were in possession of material nonpublic information about Vaxart when they sold their Vaxart shares.

The Trial

On April 14, 2026, trial commenced in the United States District Court for the Northern District of California in the plaintiffs’ case against the Armistice defendants, with Judge Vince Chhabria presiding. The trial continued for eight days.

Key evidence at trial related to Vaxart’s June 25 and June 26, 2020, press releases. Among other things, the plaintiffs contended that the press releases misleadingly omitted that Vaxart had not been selected for federal vaccine funding as part of “Operation Warp Speed,” and that what the company had been selected for was a request to test its COVID-19 vaccine on nonhuman primates. As the plaintiffs argued at trial, the press releases misleadingly suggested that Vaxart was receiving “a huge infusion of government cash to develop a vaccine.” Investors were not told “it was a monkey study.”

The Armistice defendants, for their part, argued that they were not responsible for the content of the disputed press releases, but rather that the press release contents were the responsibility and product of company management. Armistice also presented testimony it contended showed that the press releases were in fact accurate and true. Armistice also argued that the plaintiffs were trying to prove their case by cherry-picking headlines and words in the press releases, arguing further that a reasonable investor would not read or understand the press releases in that way.

According to the Law360 article to which I linked above, the jury deliberated for less than four hours over the course of two days before reaching its verdict. The jury specifically held that the plaintiffs had not proven that the defendants had engaged in a scheme to defraud and had not proven their insider trading allegations.

Discussion

As readers undoubtedly are aware, trials in securities class action lawsuits are exceedingly rare. Almost all securities class action lawsuits settle or are dismissed. Based on my sources, I estimate that out of the more than 7,000 securities class action lawsuits that have been filed in the United States since the beginning of 1996, only around 30 have gone to trial. (That is, less than half of one percent of all securities class action lawsuits filed since the beginning of 1996 have gone to trial.)

Although securities suit trials are quite rare, this case is in fact the second securities suit to go to trial in just the last few weeks. As discussed at length here, in March 2026, the class action securities lawsuit investors filed against Elon Musk in connection with his acquisition of Twitter went to trial, resulting in a split verdict that included jury findings that Musk had violated the securities laws with respect to at least some of the securities law violations the investor plaintiffs alleged in that case.

Though the trial in this case followed the trial in the Musk/Twitter acquisition case by just a few short weeks, before the March 2026 Musk/Twitter acquisition trial it had been (as far as I can tell from my sources) over three years before that since there had been a trial in a securities class action lawsuit. The most recent trial before the Musk/Twitter acquisition trial was the January/February 2023 trial in the Musk/Tesla “take private” case, as discussed here.

The defense verdict in this trial abets a cynical view I have long harbored (mostly silently), which is that if more securities class action lawsuits went to trial, fewer would get filed. Knowing they almost certainly will never have to substantiate their allegations, plaintiffs’ lawyers feel free to file securities lawsuit complaints with reckless abandon. More defense verdicts of the kind the jury reached here might (I have conjectured, at least to myself) check the aggressive impulses of at least some plaintiffs’ lawyers.

Of course, there are some obvious responses to this view – among other things, the plaintiffs in this case did prevail on the motion to dismiss and did secure a $12 million settlement from the Vaxart defendants. Moreover, the split verdict in the Musk/Twitter trial resulted in a plaintiffs’ verdict as to some of the claims in that case, claims that according to the plaintiffs’ counsel in that case could result in a damages award of over $2.5 billion.

In other words, notwithstanding the defense verdict in this case, there still are very good reasons why many defendants might choose not to go to trial, and there are no guarantees that even if more securities suits were to go to trial that the upshot would be that fewer cases would get filed, as I might have cynically supposed.

As I said in advance of the Musk/Telsa “take private trial,” these cases  “rarely go all the way to trial. In part because you are putting all of the outcome determination in the hands of a bunch of strangers.”