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Market Insight: Power Struggle Arises at XTL Biopharmaceuticals: Court Documents Reveal ‘The Social Proxy’ Founders Fear Collapse Amidst Refusal for Cash Infusion (NASDAQ: XTLB)

News provided by news direct2024-10-30

--News Direct--

XTL Biopharmaceuticals Ltd. (NASDAQ: XTLB) is facing a dramatic internal struggle that could spell the collapse of Social Proxy, the AI data company it recently acquired. Initially seen as a bold move to diversify XTL’s portfolio, the acquisition has led to a court battle, a special comittee, and an unsettling silence from the company’s leadership. Investors are left wondering what's next for XTL and the Social Proxy.

A Storm Brews: From Autoimmune Focus to Corporate Power Play

XTL Biopharmaceuticals, once a promising player in the biotech space with a focus on autoimmune diseases like lupus and Sjögren’s syndrome, has evolved over the years into something of a shell company. The company’s pivot came in August 2024, when it acquired Social Proxy, an AI-based proxy technology and data extraction platform. The acquisition was meant to reignite XTL’s fortunes, providing a foothold in the rapidly growing web data market.

In exchange for 5.29 million American Depositary Shares (ADS), representing 44.6% of XTL’s outstanding share capital, and $430,000 in cash, XTL took control of Social Proxy. The plan appeared straightforward: leverage Social Proxy’s scalable AI technology to diversify into high-growth sectors. However, almost immediately after the acquisition, internal conflict began to surface.

Financial Discrepancies and Legal Quandaries

The first public sign of trouble came on October 9, 2024, when Tal Klinger and fellow XTL board member Yair Redl filed an emergency motion with the Tel Aviv Economic Court. They requested an immediate $200,000 cash injection into Social Proxy to prevent what they described as "irreparable damage" to the company. Klinger and Redl feared that Social Proxy, the company Klinger had built, was in danger without this urgent support.

But the court rejected their motion, ruling that it was up to the special committee formed after the acquisition to address the financial situation. The court emphasized that the governance structure of XTL, particularly through the special committee, was the appropriate avenue for resolving these disputes—not the judiciary. This decision shifted the responsibility back to XTL’s board, which accordingly acted to create the special comittee, according to a recent filing, but it also raised questions: Will the special committee act in time to save Social Proxy, or was this delay part of a broader power play?

Alexander Rabinovitch: A Key Player with a History of Corporate Takeovers

Alexander Rabinovich, a director and shareholder of XTL and seen by many as a key controlling figure, is known for his role in the corporate world. Most notably, he was involved in a high-profile 'takeover' of InterCure (NASDAQ: INCR), a cannabis-focused company. Rabinovitch’s track record of successfully navigating corporate control has made him a figure of interest in XTL’s current situation. However, this time, the company in question is Social Proxy, and the stakes are just as high.

While there is no direct evidence suggesting Rabinovich is actively undermining Social Proxy, his role as a key decision-maker and his history of takeovers lead some to speculate on his motives. Investors are left to wonder if Rabinovitch’s influence on XTL and The Social Proxy is what's behind the seemingly odd occurances. Israeli media has often referred to the merger as a move orchestrated by Rabinovich himself, given he tendency to get personally involved in the companies he owns. Moreover, Rabinovich himself was named in the court filing.

Silence and Lack of Transparency: Investors in the Dark

One of the most unsettling aspects of the ongoing conflict is XTL’s lack of communication. Since the acquisition, XTL has remained silent, issuing no press releases to inform investors of the internal turmoil or the ongoing legal motion. The company has made no moves to rebrand or clarify its strategic direction, leaving shareholders in the dark.

The only public acknowledgment of any issues came on October 15, 2024, when XTL filed with the SEC, disclosing disputes over the financial data provided by Social Proxy during the acquisition. However, this filing made no mention of the court motion or the urgency of Social Proxy’s financial distress. This absence of transparency has fueled speculation and raised concerns about XTL’s leadership and intentions.

The Court Ruling and Its Aftermath

The Tel Aviv Economic Court's October 9 ruling dealt a blow to Klinger and Redl’s attempt to secure immediate funding for Social Proxy. The court deferred to the special committee to handle the situation, reinforcing the idea that internal governance should decide Social Proxy’s fate. This decision puts Social Proxy’s future in the hands of a few powerful figures at XTL, with Rabinovitch playing a central role in that decision-making process.

Although the court did not interfere directly, it left Social Proxy hanging by a thread, dependent on decisions made by XTL’s special committee. With the fate of the company in the balance, the question remains whether the committee will act in time to save Social Proxy or if this marks the beginning of the end for the AI company.

This market transparency report is not financial advice. The content may unintentionally include errors or information that is not up to date. Readers are responsible to do their own research. We encourage you to read XTL's full filing on the matter. We are not licensed nor do we seek to provide any form of licensed advice. All content is for informational purposes only. Readers are advise to do their own research and seek out professional advice.