Panther Partners Inc. v. Ikanos Communications, Inc.
United States Court of Appeals for the Second Circuit
681 F.3d 114 (2d Cir. 2012)
In the weeks before a secondary stock offering, Ikanos Communications received an increasing volume of complaints from its two largest customers, together accounting for 72% of its 2005 revenue, about failing chips, yet proceeded with the offering without disclosing these issues; three months later Ikanos agreed to replace all the defective chips and subsequently reported a significant net loss, causing its share price to drop over 25%.
Whether a company, in connection with a sale of securities, has a duty to disclose information if an event or uncertainty is known to management and is reasonably likely to have material effects on the company's financial condition.