significantly the obligations of public companies and their managers
to disclose preliminary merger negotiations to the public.
It also has adopted a rule already applied by most lower courts
- the "fraud-on-the-market theory" - that makes it far easier for
plaintiffs who bring suits for securities fraud to prove their
losses were caused by misleading statements made by defendants.
Under this theory, the court said that investors who traded in a
company's stock at a time that the market price had been distorted
by false statements made by the company could be presumed to have
been defrauded if they lost money because of that distortion.
Experts in securities law on both sides of the case said the
decision would make the lives of managers more difficult by forcing
them to make judgment calls about whether to disclose preliminary
merger negotiations and other significant transactions in the
If the managers made misleading denials or incomplete statements
about such talks, they could face legal liability; if they provided
reasonably full disclosure, they could risk jeopardizing the deal.
"I definitely agree with the concept and it certainly gives a
course of recovery when there's fraud-on-the-market," said Susan
Bryant, administrator of the Oklahoma Securities Commission.
"The question," she said, "is at what point do they have to
disclose? I don't know how far they've gone, but it's certainly
interesting to see that."
Bryant said she felt as though a company should disclose
potential merger talks "as soon as they have a commitment to go
forward" so that the idea of all shareholders having equal access to
that information" becomes somewhat of a reality.
"Some companies would not disclose anthing," Bryant said,
because the officials said "it would jeapordize the entire deal.
"But the other position is that once there is anything more than
just talk, it should be disclosed," Bryant said.
Another Oklahoma City executive who was intimately involved in
merger negotiations between Oklahoma City-based USPCI Inc. and the
Union Pacific Corp. was Larry Shelton, Executive Vice
President-Finance for USPCI.
Shelton said his company took a conservative approach to dealing
with the press and the statements they made, saying:
"We issued a press release and gave out all the facts and did
not comment except for what was in the press release. …