Eisenstadt v. Centel Corp.
United States Court of Appeals for the Seventh Circuit
113 F.3d 738 (7th Cir. 1997)
Centel Corporation (defendant) announced it would sell itself through a competitive auction assisted by investment banks, and its stock price jumped from $37 to $48 per share; despite little real interest and only seven low bids that were ultimately rejected, Centel kept issuing optimistic press statements describing the process as going smoothly, before eventually negotiating a sale to a non-bidder at just $33.50 per share. Stock purchasers (plaintiffs) sued, claiming they were misled by Centel's optimistic announcements into overpaying for stock; the district court granted Centel summary judgment.
Whether a company's nonspecific optimistic representations about an ongoing auction process can mislead a reasonable investor into paying more for its stock.