Company's Failure to Disclose or Misrepresent Its Status Grounds for Lawsuit

March 5, 2013 by Thomas F. Burke, P.C.

When it comes to selling stock, companies must be aware of their obligations to their investors. Among the most important of these obligations is the necessity of properly representing to investors the financial and legal status of the company and how that might affect the company's stocks.

One company that recently failed to do this is YPF Sociedad Anonima. In November, 2010, YPF filed a Form F-3 Registration Statement for their offering with the SEC. In March, 2011, the Prospectus with respect to the offering went into effect and more than 26.2 million shares of YPF American Depositary Shares were sold to the public at a rate of $41 per share. This put the total value of the offering at more than $1 billion.

However, there are certain important facts about YPF which the company failed to disclose or misrepresented in its Registration Statement. These facts include, among others:

  1. that the YPF faced a risk of nationalization by the Argentinean government;
  2. that the company's risk of nationalization had increased due to its failure to adequately produce oil and gas within Argentina as well as its failure to reinvest a certain portion of its profits back into the company;
  3. that the company was in breach of its concession contracts with various Argentinean provinces; and
  4. that nationalization by the Argentinean government would likely have a drastic, adverse effect on shareholders and the company's market value.

Had this information been made available to investors, a number of them would not have purchased the stock. These are the allegations laid forth in a complaint filed in a class action lawsuit against YPF. Anyone who purchased YPF's American Depositary Shares is eligible to participate in the class action.