Services announcing facts surrounding proposed acquisition

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Reference no: EM132196406

Assume that you are the CEO of Metro Corporation, which is listed on a major national stock exchange. The company is acquisition-minded, and you have begun secret negotiations with Urban Corporation for a friendly take-over. On July 1, these negotiations led to you reaching an agreement in principal with the CEO of Urban, and you and she plan to propose the matter to your respective boards within a week so that a final agreement for the acquisition can signed by both sides by July 15. Neither the negotiations nor the agreement in principal has been announced to the public. • On July 1, are you legally required to send a press release to the major news services announcing facts surrounding the proposed acquisition? • If a security analyst visits Metro to obtain information about your company for a report he plans to make to his customers, may you inform him of the current state of the negotiations? If you do, are there any other legal requirements imposed on you? • For several weeks, you have been considering the purchase of 1,000 shares of Metro to add to the 10,000 shares you already own. During that time, you have also considered purchasing the stock of several other corporations, including 1,000 shares of Urban. May you make these purchases now? • You are having a discussion alone with your sister at family gathering on July 4. She asks how the company is doing, and your response is “Please don’t say anything to anyone, but I am excited because we are in the process of negotiating with Urban to acquire it; it is still tentative, however, so this has to remain just between us”. Unknown to you, your sister purchases a large block of Urban stock on July 6. Also unknown to you, your sister informs her son, who is a broker, and he in turn discloses the information to his boss at the investment company. Both the son and his boss also purchase large blocks of Urban stock on July 10. On July 15, the acquisition of Urban by Metro is announced to the public, and the stock price of Urban rises 30%. Your sister, the son, and the boss all sell their shares on July 17 at a handsome profit. Are you liable for any securities law violation as a result of this scenario, and if so, what are the factors that affect your liability? Please make sure that you consider all of the transactions described.

Reference no: EM132196406

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