David, Don't have to go far to find the hype..negative hype, that is! Where have you been? Haven't heard from you in ages....Thought for sure you would be around to provide your views on the Cabot artical. At least THAT negative news had some effect in moving the stock.
Have been on the phone for some time checking out some of the possibilities here. PRST says they are absolutly not concerned and state they believe the suit has no merrit at all. Also spoke to a securities lawyer, he states that he highly doubts PRST could be found liable or even held responsible for the independent auditors miscalculation in the financial statements. He also stated that it is very likely that even the auditors will not be found to be liable if the case is carried through.
Cabot Market Letter issued a special update at 4:00pm this afternoon stating the following:
"Securities Class Action alleges PRST financial statements for 1995 and 1Q of 96 were false and misleading. We believe the suite has no merrit and is superficial bad news. It will have little effect on PRST's future sales and high earnings. In fact, we believe that PRST stock is at a great buying point right here."
Interesting to see the action on the stock from 2:35pm on. Those in the know must feel the same way as those I spoke to about this. Very little selling...in fact a bunch of buying! Short Sellers must have been dissapointed. Stock traded as follows:
Prior to announcement the stock had opened and traded as high as 73 in the first hour this morning. For most of the day the stock traded between 62 - 65.5. Right after the announcement, (first 5 minutes) the MM's dropped the price to 59 - 60. It immediately generated steady strong buying which caused the stock to move right back up, trading 61 - 63 between 2:40 and 3:30pm. At 3:45 the stock was at 65.5. Stock closed at 64.5. The largest block traded today was a buy just before the bell - 6000 shares. Between 2:30 and 4:00pm the other largest trades appeared to be buys and were as follows:
1 trade - 3,000
3 trades - 2,000
2 trades - 2,500
1 trade - 1,500
There were a few trades at 1000 and many trades below 500 shares. All of the big money with the access to the instant news releases were not concerned and did not sell shares. If there was any short interest on this news here, they were sure in small size trades.
Another point, I called the firm handling the C.A. that is listed on Jacks post about 4:30pm. They had no one that is handling the case in the offices so they have promised to have the attorney contact me back Monday. I intend to ask a number of key questions and will post their response here. If you have any questions to add to the list, please post them. They will be asked.
In answer to Dave's question regarding attorney costs etc. PRST is no different than any other firm or company. They have attornies on retainer for this type of case.
If the big money is not concerned with this, then neither am I. Could present a good buying opportunity first thing Monday morning if the MM's gaps it down or the media (Barrons) etc. makes a big deal of this.
Jack, I understand you are in fact an accountant and have represented a large firm. You mentioned prior post that this type of action was probally imminent. What are your true views taking a neutral,(non short) position? Does accounting errors made similiar to this ever reflect back to the company in any degree financialy? Is the accounting firm ever liable in this type of error? Honest opinions now!!! I dropped this info off with my accounting firm prior to my accountant leaving for the day. Off hand, he does not believe there is any merit to a case like this on the information I could quickly tell him. He will read the Press Releases etc. and will fill me in on Monday.
Now, I'm Going Fishing - Walleye hitting great on Lake Erie. Will check in tomorrow.
Regards,
Neil
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