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4 - Apple and the Controversy of Projections Litigation

Published online by Cambridge University Press:  14 July 2022

James J. Park
Affiliation:
University of California, Los Angeles
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Summary

This case presents the grimly familiar picture of disappointed investors crying fraud after fortunes were lost when a promising corporation stumbled. US District Court for the District of Massachusetts, 1993 In the Xerox and Penn Central cases, public companies misstated their financial statements to support false narratives of their ability to continue generating profits. Companies also shape investor perceptions of their future performance through disclosures about their businesses, particularly with respect to important products. Just as the conglomerates of the 1970s sought to satisfy market expectations by reporting earnings increases, the computer companies of the 1980s faced pressure to successfully complete the development of new technologies. Investors were willing to pay more for a stock to take into account the possibility that a promising product would be widely embraced by consumers. However, if there was a significant setback, they could lose faith and flee the stock. Computer company stocks were thus more volatile than the stocks of companies in traditional industries.1

Type
Chapter
Information
The Valuation Treadmill
How Securities Fraud Threatens the Integrity of Public Companies
, pp. 50 - 71
Publisher: Cambridge University Press
Print publication year: 2022

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