Corporation A was involved in merger discussions with Corporation B. During this

Question

Corporation A was involved in merger discussions with Corporation B. During this time, Corporation A made public statements denying that any merger negotiations were taking place or that it knew of any corporate developments that would account for heavy trading activity in its stock. A class of former shareholders who sold Corporation A stock after the public denial of merger activity and the announcement of the merger some six weeks later sued Corporation A, contending it made material misrepresentations of fact in denying the merger activity Corporation A stock increased 25% upon the merger announcement. Corporation A stated that at the time of its denial of merger activity it was just involved in preliminary negotiations and its actions were not material until negotiations reached an agreement in principle. Moreover, it asserted that the shareholders made no showing that they relied on the denial statement. Decide.

Explanation / Answer

In this case Corporation A is not at all responsible when the shareholder sold his stocks because as the deal regarding the merger was not finalized so corporation A did not accept ay collaboration claims and that is fair and legal because an organization has the right to withheld any internal information before it is being made public for announcement and this case is such an instance where the organization did not disclose or accept the claims made by the media. The shareholder who sold the stocks of corporation A did it out of his own interest and has no right to blame corporation A for his loss, the shares are his property and it is his right to protect and use the shares accordingly for his benefit and no one can be blamed for any of the loss he incurs.

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