General Motors has won dismissal of a shareholder lawsuit that claimed the automaker of augmenting sales around the time of its initial public offering in November 2010 by quietly unloading vehicles on its dealers.
U.S. District Judge Laura Taylor Swain said the automaker disclosed in its IPO fillings all the information deemed necessary on the growth of unsold vehicle supply for investors to determine whether it was “channel stuffing” or building up excess inventory.
Swain stated that “GM did not characterize this increase in inventory as ‘channel stuffing’ or accuse itself of ‘building up excess inventory on dealer lots,’ does render the disclosure document actionable. GM need not characterize events in the most negative way possible as long as the particular negative trend is conveyed to investors.”
Investors in GM’s common and preferred stock claimed that the automaker’s disclosed information created a false impression that sales and revenue were rising and that General Motors was recovering from its June 2009 bankruptcy and federal bailout. The U.S. Treasury Department and other investors sold the GM common shares in the IPO at $33 each. But by July 2012, they had gone down 43% – as low as $18.72. GM’s IPO raised about $23 billion. The plaintiff investors tried to regain their losses or end their purchases.
By Gabriela Florea