Vantive is a manufacturer of client management software designed for use by sales representatives from various industries. Vantive is also a retailer and provides support services for the software. After a successful public offering in 1995, the company’s stock sold for $6 per share and soon rose to as high as $35 per share. When the tech sector slumped in 1998, the stock dropped to less than $15 per share over an eight month period. During this eight-month period, management forecast strong gains in income by using a model that recognized millions of dollars in revenue based on software licenses that would not actually be realized unless the licensees were successful in sellin sublicenses for the software. A group of shareholders brought suit under rule 10b-5.

CASE QUESTIONS

1. Were the forecasts sufficient to constitute a material misstatement of fact and an omission that violated securities laws? Explain.

2. Is Vantive protected by the PSLRA?