Immunovant's Billion-Dollar Discount: A Case of Shareholder Exploitation?

Marcus LeeWednesday, May 21, 2025 9:03 pm ET
13min read

The biotech sector is no stranger to high-stakes financing deals, but Immunovant, Inc. (NASDAQ: IMVT) has now become the poster child for a growing concern: corporate governance failures that favor insiders at the expense of minority shareholders. On January 15, 2025, the company closed a $450 million private placement (PIPE) with terms so one-sided they’ve sparked a federal investigation into potential fiduciary duty violations. For investors, this is a cautionary tale—and a wake-up call to scrutinize the true value of their holdings.

The Deal That Raised Red Flags

Immunovant sold 22.5 million shares of its common stock at $20.00 per share to three institutional investors, including its controlling shareholder, Roivant Sciences Ltd. The catch? The $20.00 price was $3.48 below the prior day’s closing price, a discount that translated into a $60 million windfall for Roivant—a stakeholder already holding between 54.6% and 73.8% of the company. While the transaction was legal under securities exemptions, the optics are damning.

The $60 million discount effectively transferred wealth from minority shareholders to Roivant, which stood to gain disproportionately as the largest buyer. This is not a trivial amount: it equates to roughly 75% of Immunovant’s net income in 2024 ($80 million). The question investors must ask is: Why did Immunovant’s board agree to such terms?

A Board Under Scrutiny

The answer lies in the board’s composition and incentives. Immunovant’s directors are deeply entangled with Roivant. As the controlling shareholder, Roivant’s interests dominate corporate decisions, and the board’s independence is questionable. The January PIPE’s structure—a sweetheart deal for insiders—raises serious doubts about whether the board fulfilled its fiduciary duty to protect all shareholders.

This isn’t just theoretical. On January 17, 2025, the law firm Robbins Geller Rudman & Dowd LLP announced an investigation into Immunovant’s directors and Roivant for potential breaches of fiduciary duty. The firm is seeking to determine whether the board’s actions were self-serving or whether minority shareholders were misled about the transaction’s fairness.

The Cost of Compromised Governance

The implications are dire. For Immunovant’s minority shareholders, the $450 million PIPE isn’t the lifeline it appears. The $60 million discount to Roivant reduces the proceeds available for advancing its lead drug, IMVT-1402, and other pipeline assets. Instead of funding clinical trials or manufacturing, capital is effectively diverted to a related party.

Consider the math: Immunovant’s pro forma cash balance as of December 31, 2024, was $825 million after the PIPE. But with R&D expenses already exceeding $94.5 million in Q4 2024 alone, the company’s burn rate is unsustainable unless IMVT-1402 delivers breakthrough data. If the drug falters, shareholders face a double whammy: wasted capital on insider deals and no product to show for it.

Why Act Now?

The writing is on the wall. Immunovant’s governance failures are not isolated. The Roivant connection has historically prioritized vertical integration over shareholder value. In 2023, a similar PIPE for $200 million also saw Roivant buy shares at a steep discount, setting a pattern of extraction.

For investors, the risks are clear:
1. Dilution: The 22.5 million new shares issued in January diluted existing shareholders’ stakes by nearly 15%.
2. Conflict of Interest: Roivant’s control ensures its interests—whether through asset sales, spin-offs, or further dilution—will always come first.
3. Legal Exposure: The ongoing investigation could lead to costly settlements or reforms that further drain resources.

The Bottom Line: Exit Strategically

This is not a company to hold for the long term. The governance red flags and the board’s willingness to prioritize Roivant’s gains over minority shareholders’ interests are existential threats. Even if IMVT-1402 succeeds in late-stage trials—a big “if”—the structural issues at Immunovant could derail any value creation.

Action Steps for Shareholders:
- Sell immediately: The stock’s post-PIPE drop (nearly 15% in a week) hints at market skepticism.
- Join the class action: File a claim with Robbins Geller (https://www.rgrdlaw.com/cases-immunovant-investigation-imvt.html) to seek redress.
- Avoid new investments: Until there’s board restructuring and transparency, the risk-reward ratio is skewed against shareholders.

Immunovant’s PIPE transaction is a stark reminder: when corporate governance fails, even promising drugs can’t save a stock. For investors, walking away now is the only rational move.

This analysis underscores the urgent need to prioritize governance integrity in biotech investments. With Immunovant’s board failing this test, shareholders must act decisively—or risk being left holding the bag.