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Matt addressed this in a footnote, this is the "fraud on the market theory". > The fraud on the market theory is based on the hypothesis that, in an open and d
by lilyball 2y ago
Matt addressed this in a footnote, this is the "fraud on the market theory".
> The fraud on the market theory is based on the hypothesis that, in an open and developed securities market, the price of a company’s stock is determined by the available material information regarding the company and its business. Misleading statements will therefore defraud purchasers of stock even if the purchasers do not directly rely on the misstatements. The causal connection between the defendants’ fraud and the plaintiffs’ purchase of stock in such a case is no less significant than in a case of direct reliance on misrepresentations.
- DangitBobby 2y agoThanks for sharing! I still don't understand why the law works this way though.
- felixfbecker 2y agoAny public information eventually is priced into the stock price by the market. Say you buy the stock even though you didn't read the DEI statement, but other people bought the stock before you having read it. Their purchases drove up the stock price, so you had to pay more for the stock. You got defrauded of the delta. Especially if now it comes out, the price goes down, and you make losses.
- maeil 2y agoCould you explain how else it would possibly work? How would someone prove that they were mislead by this? Me: I read their diversity statement and was mislead by it. Them: Nuh-uh, you didn't!