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Technology Stocks : Pure Atria Corp(PASW) and Rational(RATL) Merger
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To: joel sherriff who wrote (116)5/2/1997 3:49:00 PM
From: Michael Madden   of 147
 
Yes, I mentioned the possibility of a class action lawsuit.

How much a class action lawsuit of this type affects a stock depends on a number of factors including current investor moral and whether the announcement of the suit contains any evidence of merit. Usually, these lawsuits are based on allegations of fraud that are difficult to prove; sometimes, the lawyers attempt to use the normal practice of insider selling as evidence of illegal insider trading on bad news. My guess is that such an announcement would have been a quarter to half point drain on the stock last week. This week, with the stock climbing and its merger value still climbing (because RATL is climbing), investor moral has risen a little; announcement of a class action lawsuit will probably be ignored by the street and individual investors alike. The street has come to expect these lawsuits whenever a stock free falls.

Other stocks that have recently been hit by class action lawsuits include Citrix Systems (CTXS) and U.S. Robotics (USRX). Announcment of the lawsuits had very little impact on either stock. Niether of these lawsuits have any merit in my opinion. Right now, these two stocks are rebounding more strongly than the market (as is PASW and RATL!).

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