Case Study

Case Study in Securities Loss Causation

Plaintiff successfully headed a public, but young technology company and was rewarded with a number of non-qualified employee stock options. After a time, the company attracted interest from a larger industry player and agreed to be acquired. As part of the acquisition, plaintiff exchanged his employee options for options in the acquirer company and left the combined business to pursue other opportunities.

Soon thereafter, the acquiring company issued a press release announcing that management had booked fictitious revenues and the company would restate earnings for several past years. Following the announcement, the company’s stock spiraled downward and the plaintiff’s previously valuable options quickly became worthless, never to recover. Mr. Greene was asked to opine as to the cause of the stock drop and as to the amount of damages to Plaintiff as a result of the loss of value of his options.

Based on the facts, Mr. Greene was able to support the position that the press announcements were, in fact, the cause of the damages suffered by plaintiff. The damage calculation involved a plethora of considerations, including: evaluating multiple option pricing models; determination of the appropriate point in time to value the options; and a comparison of various discount rates used to calculate damages from the loss of use of plaintiff’s capital from the time of the injury to the time of the trial. Supported by Mr. Greene’s expert witness reporting and deposition testimony, the plaintiff achieved a successful pre-trial settlement.

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