Huffy is a public company that engaged in negotiations in 2002 with Gen-X, a Canadian manufacturer of
Question:
Huffy is a public company that engaged in negotiations in 2002 with Gen-X, a Canadian manufacturer of snowboards, inline skates, and other sporting goods.
Huffy reported the acquisition in a press release and made several forwardlooking statements concerning the extensive due diligence used by Huffy’s executive team in evaluating the purchase. Huffy discovered soon after purchasing Gen-X that Gen-X’s costs were not controlled, its inventory was in a state of disrepair, its invoices had not been collected, and its bills were unpaid.
Investors sued Huffy alleging that its officers had engaged in materially false and misleading statements through their reports and press releases.
CASE QUESTIONS
1. Analyze the investors’ claim under Section 10b-5. Are Huffy’s statements about due diligence considered “material”?
2. What facts would help the investors prove scienter under the PSLRA?
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1 Yes The court ruled that he extensive due diligence purportedly performe...View the full answer
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