Legal Question in Securities Law in California

Misleading CEO statement

Is the CEO of a publicly traded company liable for providing false information to the employees regarding the intentions of the owners to sell the company?

In January, I exercised and sold stock options based on the expectation that the company would remain independent. I made the decision to sell the stock primarily on the information provided by the CEO of the company at a company wide meeting. A couple of weeks ago, the company announced a merger agreement with a larger competitor and the stock has now risen dramatically. Had I not sold the stock at that time the value of my stock options would have been $160,000.00 higher. The magnitude of the deal leads me to believe that the CEO was aware of the negotiations when he made the statement regarding the possible merger.

Do I have a case?


Asked on 4/06/07, 2:23 am

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Misleading CEO statement

Possibly, but many reversals of plans and policies can take place in two or three months. A lot more investigation would be required. The starting point would be to review all the company's public announcements during the period, those or the acquiring company, and then both companies' SEC filings such as 10-Q reports. Of particular interest would be what the CEOs and PR people said at the time of the initial public announcement of the merger. One would also want to look at disclosed insider trading in both companies.

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Answered on 4/06/07, 3:20 pm


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