United States District Judge Laura Taylor Swain in Manhattan dismissed a shareholder lawsuit against accusing General Motors Co. of padding sales as it got on with its initial public offering in November 2010 by secretly unloading vehicle inventory on dealers.
Swain ruled that GM disclosed in its IPO offering materials "all of the information necessary" about the increasing unsold vehicle supply to allow investors to determine whether the carmaker was "channel stuffing."
She wrote in her ruling that GM’s move not to describe the inventory surge as “channel stuffing” does not make disclosure document actionable. She noted that the carmaker does not to describe events in the “most negative way possible” as long as it has conveyed the particular negative trend.
A group of investors in GM's common and preferred stock – led by Teamsters Local 710 Pension Fund of Mokena, Ill., -- argued that the carmaker’s disclosures made a false impression that sales and revenue were increasing and it was recovering from 2009 bankruptcy and federal bailout.
When GM held its IPO, the US Treasury Department as well as other investors sold their common shares at the event at $33 apiece. However, the value of the shares dropped 43 percent to $18.72 by July 2012, causing losses to the plaintiff investors.
They had sought to either recover their losses or rescind their purchases. A number of GM officials—like former chief executive Daniel Akerson and former Chairman Edward Whitacre – as dismissed as defendants. [source: Reuters.com]