XTL Faces Lawsuit Over Delayed Disclosure and Collapse of Key Pharmaceutical Subsidiary

A shareholder of Israeli pharmaceutical company XTL has filed a derivative lawsuit against the controlling shareholder and company executives, alleging conflicts of interest, failures in due diligence, and delayed investor reporting following the collapse of its main subsidiary, De Social Proxy. The complaint highlights that shareholders were only informed about the subsidiary's failure a year and a half after the event, despite the subsidiary being XTL's primary asset until at least June 30, 2025. The company later claimed it lost control of the subsidiary on January 1, 2025, just four and a half months after acquisition, but this was disclosed to the public only after the subsidiary had ceased operations.

The lawsuit accuses management at both XTL and De Social Proxy of blaming each other with contradictory accounts and failing to provide a coherent explanation for the rapid loss of a multi-million-dollar asset, the delayed public disclosure, and the absence of a thorough investigation into decision-makers' responsibilities. The complaint also references a separate 130 million shekel lawsuit filed by De Social Proxy founders against XTL's controlling shareholder, Ravinovitch, alleging that promised funding was not fully transferred, causing a severe cash flow crisis that led to the subsidiary's downfall.

Further allegations include conflicts of interest involving executives who held shares in Intercure, a company controlled by Ravinovitch, which was supposed to provide funding through share sales. The shareholder lawsuit questions the adequacy of the due diligence process before acquiring the subsidiary and points to the late submission of financial reports, changes in the auditing firm amid SEC delisting warnings, and an external director serving beyond the legal term limit.

The plaintiff demands approval of the derivative suit to initiate an investigation into the due diligence failures, misleading representations, and management conduct. The complaint stresses that the subsidiary's collapse was not due to unforeseen external factors but rather a series of internal decisions and omissions known or should have been known by company leadership, resulting in significant harm to XTL as the sole shareholder.

The case is pending in the Tel Aviv District Court and raises serious questions about corporate governance and transparency at XTL amid its struggles on the Nasdaq and Tel Aviv Stock Exchange.