(The news featured
below is a selection from the news covered in Federal Securities Law Reporter,
which is distributed to subscribers of Federal
Securities Law Reporter.)
Inability to Trace Shares to IPO Dooms Claim
The 5th U.S. Circuit Court of Appeals held that investors lacked standing
to sue for Securities Act Section 11 violations. The stock purchases by these
individuals were not directly traceable to the alleged false and misleading
registration statements, concluded the court, and a high probability that their
shares were IPO shares was not sufficient.
The suit arose from the purchase by investors of shares held in street name.
At the time of purchase, non-IPO shares had entered the street name certificate
and intermingled with the IPO shares. The IPO shares still comprised more than
99 percent of the pool, however. Despite expert testimony that the probability
that each lead plaintiff owned at least one share of IPO stock was "very
nearly" 100 percent, the appellate panel held that the dismissal on standing
grounds was appropriate. "These general statistics say nothing about the
shares that a specific person actually owns and have no ability to separate
those shares upon which standing can be based from those for which standing
is improper," stated the court.
Krim v. pcOrder.com, Inc. (5thCir) is reported at
¶93,126 .
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