May 20, 2005

Coffee On Dura

Professor John Coffee has a column (via law.com - free regist. req'd) in today's New York Law Journal examining the Supreme Court's recent loss causation decision. Among other issues, the column discusses the court's failure to reject the idea that an investor can claim an economic loss even if the price of his shares increased. (Regular readers will note that Professor Coffee's analysis of the pleading standard discussion in the Dura opinion differs from The 10b-5 Daily's analysis.)

Quote of note: "In the real world, however, there is a major difference: price declines are real phenomena that demonstrate that the market considered information to be material; in contrast, a price that does not change may be the result of either offsetting developments or, more likely, the fact that the allegedly material misrepresentation simply never was deemed material by the market. Indeed, to permit recovery in this case hypothesized by the Court is to permit recovery based on a double speculation -- first, as to the original uncorroborated price inflation and, second, as to what would have been the later price increase in the absence of discovery of the original inflation. Even the 9th Circuit has never gone this far."

Posted by Lyle Roberts at May 20, 2005 7:06 PM | TrackBack
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