Tuesday, August 09, 2005

Thanks Anyway, But Only One Lead Plaintiff Group Needed Here

The lead plaintiff contest has come to a close in the Molex securities class action, with a group of three investors taking the prize. Interestingly, despite the electronics giant's $5 billion market cap, the two largest groups lost only $18,000 (Pontiac Group) and $12,000 (Ponzo Group). But no matter which way you slice it up, that put Pontiac ahead of the game, making Judge Ruben Castillo's (N.D. Ill.) job a walk in the park. OK, well almost.

One thing you should know before we start (and don't worry, we'll be done soon) is that Molex has three distinct classes of stock: Common Stock, Class A Shares, and Class B Shares. Ponzo tried to use this to their advantage, or as the judge saw it, "muddy these otherwise clear waters." In a nutshell, Ponzo asserted "that it should be appointed as co-lead plaintiff to represent a sub-class of the purported class members consisting of holders of Molex Common Stock." In other words, Ponzo argued it should win "because it suffered $12,273 in losses from its purchase of Common Stock while the Pontiac Group only suffered $5,450 in losses from its purchase of Common Stock," with "the remainder of the Pontiac Group's losses stemm[ing] from its purchase of Class A Shares."

Well, if you glanced at the headline, you won't be surprised to learn that Judge Castillo wholeheartedly rejected this, finding "that the Ponzo Group's request to slice and dice the reported losses between Common Stock and Class A Shares departs from the presumption laid out in the PSLRA," of appointing the movant that "has the largest financial interest in the relief sought by the class." "The Ponzo Group has pointed to nothing in the pleadings which would suggest that any of the relief sought by Common Stock holders is different than the relief sought by Class A shareholders. The relief sought by the class here is compensation for losses sustained from investment in Molex securities," so Pontiac wins, and Ponzo doesn't.

You can read Takara v. Molex, issued July 6, 2005, at 2005 U.S. Dist. LEXIS 15820.

Nugget: "It is not uncommon for a representative who purchased one type of security to represent class members who purchased a different type of security where the action is based on the same set of misrepresentations."

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