The plaintiffs held approximately 30 percent of the stock of Xpedite Systems. When Premiere Technologies expressed an interest in acquiring Xpedite in a stock-for-stock merger and acquisition, Xpedite began its due diligence investigation of Premiere. The Xpedite board entered into a merger agreement with Premiere (agreeing to the stockfor- stock transaction) and unanimously voted to recommend the merger to Xpedite’s shareholders. As a condition of entering into the merger agreement, all the plaintiffs executed stockholder agreements committing them to purchase the Premiere stock.

More than two months later, Premiere’s registration statement for the Xpedite merger became effective. Premiere then announced that it would have a shortfall in its revenues, and that it would be taking a charge against its bad debt reserves. The price of Premiere stock dropped. The plaintiffs filed a claim under Section 11 of the 1933 Act, alleging numerous material defects in the registration statement. Premiere argued that, because the plaintiffs made their investment commitment before the issuance of the registration statement, they could not recover under Section 11 since reliance on the registration statement was impossible. Should the Section 11 claim be dismissed because reliance was not possible? Explain.