SRIVARU Holding Limited Provides Update on Legal Claim by Sabby Volatility Warrant Master Fund Ltd.

Rhea-AI Summary

SRIVARU Holding (OTC: SVUHF) faces a legal claim from Sabby Volatility Warrant Master Fund in the New York Supreme Court. The dispute centers on warrant exercise calculations following Sabby's October 31, 2024 purchase of 16.8 million units. After a 50:1 reverse split, Sabby claims entitlement to 989,576 post-split shares, while SRIVARU calculates 144,766 shares based on the cashless exercise provision.

Sabby estimates liquidated damages of approximately $350,000, accruing at $120,000 weekly, plus additional damages of $850,000 for undelivered shares. The company reports that Sabby engaged in pre-selling stock between January 15-18, 2025, potentially exposing SRIVARU to buy-in protection risks. SRIVARU is actively defending against the lawsuit while maintaining focus on its electric two-wheeler mobility business operations.

Positive

• Company continues to operate and grow its electric two-wheeler mobility business

Negative

• Faces potential damages of $350,000 with weekly accrual of $120,000
• Additional claimed damages of $850,000 for undelivered shares
• Legal dispute may impact stock price and investor sentiment
• Warrant exercises and short-selling activities creating downward pressure on stock

Insights

Legal and Financial Analyst

This legal dispute presents serious financial and operational risks for SRIVARU Holdings. The core issue revolves around a 583% difference in warrant conversion calculations, with potential damages exceeding $1.2 million and growing by $120,000 weekly. The magnitude of this discrepancy suggests deeper issues beyond mere mathematical interpretation.

Several critical red flags emerge from this situation:

• Sabby's admission of pre-selling shares before actual delivery indicates potential naked short selling activities, which could explain the recent stock price volatility
• The dispute over authorized share capital raises questions about the initial due diligence process during the offering
• The company's exposure to unlimited buy-in protection risks due to Sabby's trading activities creates significant financial uncertainty

The legal battle's timing, coinciding with the company's 50:1 reverse split implementation, suggests potential opportunistic behavior. Similar warrant disputes in small-cap markets typically result in either settlement agreements or extended legal proceedings that can drain corporate resources and impact operational execution.

The company's defensive posture and emphasis on business execution in their electric two-wheeler segment indicates management's strategy to build fundamental value while fighting legal challenges. However, the ongoing legal proceedings and potential share dilution create significant near-term headwinds for shareholders.

GRAND CAYMAN, Cayman Islands, Feb. 21, 2025 (GLOBE NEWSWIRE) -- SRIVARU Holding Limited (OTC: SVUHF) (“SRIVARU” or the “Company”), has been made aware of a legal claim against the Company by Sabby Volatility Warrant Master Fund Ltd. (“Sabby”) in the Supreme Court of the State of New York, Index No. 650870/2025. The Company is committed to transparency, compliance, and protecting shareholder value while it defends itself against this claim.

Background & Sabby’s Investment Position

• On October 31, 2024, Sabby purchased 16,800,000 units, each consisting of one common share and one warrant.
• The warrants included a cashless conversion provision, allowing holders to receive two shares per warrant upon exercise.
• Sabby’s claim is based on a warrant exercise calculation that differs from the Company’s documented and disclosed methodology, which values the exercise at $0.096 per share, despite the fact that the alternative provision effectively eliminated the cost of conversion, making the true exercise price $0.
• Prior to share combination/share reversesplit event SABBY exercised 13,180,839 for 26,361,678 and as per the email confirmation SABBY left with 3,619,161 warrants as of January 16 2025. As company had to reverse split (share combination) of 50:1 to bring share price well about $1. These 3,619,161 warrants would have been eligible for 7238322 shares on pre-share combination basis or (7238322/50=144,766 shares) 144,766 post share combination basis.
• As indicated in email by Sabby, Sabby had 3,619,161 warrants remaining before reversesplit, which the Company calculated to equate to 72,383 warrants (before reversesplit warrant / reversesplit ratio that is 3,619,161/50= 72,383) which is convertible on cashless basis for 144,766.
  
  However, Sabby now claims they should have received 989,576 post-split shares, representing approximately 583% increase which company disputes based on the cashless exercise price.
  
  SABBY claims that “Sabby is entitled to liquidated damages computed in accordance with Section 2(d) of the Warrants, and attorneys’ fees pursuant to section 5(e) of the Warrants. Sabby estimates that the liquidated damages are approximately $350,000 and will accrue at approximately $120,000 per week until shares are delivered. Pursuant to the Warrants, Sabby is also entitled to damages in the aggregate amount of approximately $850,000 based on the value of the SVMH shares that SVMH failed to deliver at the relevant time.”
  
• During the offering process, company disclosed all the authorized shares and authorized capitol to underwriter and their team. SABBY or underwriters never mentioned about needing to increase the authorized capital nor raised any concern about remaining authorized capitol being insufficient to meet the need. Therefore Company never intended to modify the authorized capitol and it remained the same since the offering.
• Sabby engaged in pre-selling stock during the additional warrant and shares requested timeframe between Jan 15 - Jan 18, 2025. In an email from Sabby’s counsel on January 20, 2025, Sabby explicitly acknowledged that it had already sold shares in advance and required SVMH to deliver shares to cover its trading activity, exposing the Company to unlimited buy-in protection risks.

Company’s Response and Legal Action
SVMH is actively:

• Defending itself against the lawsuit and evaluating all legal remedies. Actual business of Electric two wheeler mobility in companies operating country is growing; company intend to execute its operation plan thus building longterm value for shareholders.
  
  The Company has observed stock price volume volatility during the relevant period and is assessing the potential impact on warrant exercises and investor sentiment. Sabby’s warrant exercises and short-selling created downward pressure on SVMH’s stock, amplifying market distortions.
  
• Ensuring compliance with contractual obligations while protecting shareholder value.
• Engaging with legal and regulatory advisors to address shareholder concerns.

Forward Looking Statements

This communication may contain a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements are based on SRIVARU’s management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events. When used in this communication, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” “promises “ and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.

This disclosure contains forward-looking statements regarding ongoing legal proceedings. Actual outcomes may differ due to court rulings, regulatory actions, or shareholder decisions. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside SRIVARU’s management’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. These risks, uncertainties, assumptions and other important factors include, but are not limited to: (a) the inability to obtain financing to complete SRIVARU’s planned expansion; (b) the inability to successfully appeal the Nasdaq’s delisting determinations; (c) costs related to ongoing operations; (d) the possibility that SRIVARU may be adversely affected by other economic, business, and/or competitive factors; (e) SRIVARU’s ability to execute its business plans and strategies, (f) SRIVARU’s estimates of expenses and profitability; and (g) other risks and uncertainties indicated from time to time in SRIVARU’s public filings with the SEC, including those under “Risk Factors” therein. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made.

 These forward-looking statements speak only as of the date of this press release and, except to the extent required by applicable law, SRIVARU undertakes no obligation to update or revise these statements, whether as a result of any new information, future events and developments or otherwise. 

Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and SRIVARU assumes no obligation and, except as required by law, do not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. SRIVARU gives no assurance that it will achieve its expectations. 

FAQ

What is the total amount of damages Sabby is claiming from SRIVARU (SVUHF)?

Sabby is claiming approximately $350,000 in liquidated damages (accruing at $120,000 per week) plus approximately $850,000 for undelivered shares, totaling around $1.2 million initially.

How many shares is Sabby claiming they should receive from SRIVARU (SVUHF)?

Sabby claims they should receive 989,576 post-split shares, while SRIVARU calculates they are entitled to 144,766 shares based on the cashless exercise provision.

What was the original warrant purchase made by Sabby from SRIVARU (SVUHF)?

On October 31, 2024, Sabby purchased 16,800,000 units, each consisting of one common share and one warrant with a cashless conversion provision.

When did SRIVARU (SVUHF) implement its 50:1 reverse split?

The 50:1 reverse split was implemented to bring the share price above $1, affecting the warrant calculations between January 15-18, 2025.