Duke Distribution, Inc. recently had a public offering of its shares. The company’s attorneys, its CPAs, and the underwriter’s attorneys worked diligently to meet a tight deadline that management had imposed. Unfortunately, in its haste to meet the deadline, Duke’s team failed to include several items in the registration statement. The prospectus failed to mention that while Duke’s inventory-to-sales ratio was constant over the past few years; most competitors’ ratios had declined significantly over the same period. It also failed to mention that the company leases warehouses from a partnership consisting of three of its directors. The leases require rent that is about 8 percent higher than the market rate for equivalent facilities. After the IPO, the company engaged in additional transactions with insiders.

Now the economy has softened and competition has increased. The price of Duke Stock has fallen from $15 to $10. Is there a cause of action? Against whom? What are the defenses?