Short Sales, Damages and Class Certification in 10b-5 Actions
AbstractIn a short sale, an investor sells a share of stock he does not own and profits when the price of the stock declines. A peculiar feature of short sales is the apparent increase in the number of shares of stock beneficially held by investors over and above the actual number of shares issued by the corporation. It has previously been noted that this may create problems in the execution of proxy votes. In this paper we illustrate a related problem in the prosecution of claims of securites fraud. We examine this problem using the recent case of Computer Learning Centers, Inc., (CLC) in which the number of short sales was extremely large. Plaintiffs in the Computer Learning Centers case proposed a class including all those who purchased CLC common stock from April 30, 1997 to April 6, 1998. Defendants opposed certification of the class, focusing on the large number of short sales and the resulting difficulty in establishing which members of the class actually had standing to sue. The court denied the motion for class certification. Although the court gave plaintiffs leave to amend the class, the case was settled before a new class was identified.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8618.
Date of creation: Dec 2001
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-12-04 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Susan E. K. Christoffersen & Christopher C. Geczy & David K. Musto & Adam V. Reed, 2004. "How and Why do Investors Trade Votes, and What Does it Mean?," CIRANO Working Papers 2004s-23, CIRANO.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.