An investor of Capital Gold Corporation (AMEX:CGC) filed a lawsuit in State Court against the Capital Gold’s board of directors alleging breaches of fiduciary duties arising out of their attempt to sell Capital Gold Corporation too cheaply to Gammon Gold Inc.
According to the complaint the plaintiff alleges that Capital Gold directors refused to negotiate in good faith with competing bidders and agreed to an offer that is unfair and undervalues Capital Gold Corporation.

On Friday, October 1, 2010, Capital Gold Corporation (TSX and NYSE AMEX: CGC) and Gammon Gold Inc. (NYSE: GRS, TSX: GAM) have entered into a merger agreement pursuant to which Gammon Gold will offer to acquire all of the issued and outstanding common shares of Capital Gold Corp. (CGC) in a cash and share transaction. The total consideration for the purchase of 100% of the fully diluted in-the-money shares of Capital Gold is approximately US$288 million or US$4.57 per Capital Gold Corp. share based on Gammon Gold’s closing price on September 24, 2010 on the NYSE. According to Capital Gold Corporation based on the September 24, 2010 closing price of Capital Gold’s shares on the NYSE AMEX, the acquisition price represents a 20% premium to the close on September 24th and a 30% premium to the 20-day volume weighted average price on the NYSE AMEX ending on that date.

But shares of Capital Gold Corp. traded before the announcement as high as $4.98 per share on Friday Oct. 01, 2010 and then declined in response to the buyout offer to as low as $4.68 per share. CGC shares closed on that Friday at $4.82 per share, still well above the current offer and at least one analyst set a target price for Capital Gold of approximately $9 per share. In addition Capital Gold Corp’s 12month revenue went from $33.10million reported on July 31, 2008 to $42.76million reported on July 31, 2009. Its Net Income went within the same time frame from $6.36million to $10.41million. Furthermore, the Company's net revenues for the third quarter of 2010 increased 41.1% from the same period last year, to $17.53 million. The plaintiff seeks to block Gammon Gold Inc.’s current bid for Capital Gold Corporation.