Shareholders for CBS requested a federal judge in New York to provide a class-action certification in a 2018 lawsuit filed against the broadcasting company’s CEO, Les Moonves. The lawsuit alleges securities fraud based on the assertion that the company duped investors into purchasing stock by misrepresenting sexual misconduct allegations lodged against Moonves. Shareholders specifically accuse the CEO of making comments regarding the #MeToo movement that misled investors and led to inflated stock prices.
Lawyers for the plaintiffs allege that investors purchased CBS shares at artificially inflated prices and suffered losses when the stock declined upon disclosure of the alleged truth regarding the allegations od sexual misconduct. The class proposed by the shareholders includes all individuals that purchased stock from November 29, 2017, until July 27, 2018 and can demonstrate damage as a result of the transaction.
The conflict stems from an appearance Moonves made at the Innovative Summit put on by Variety. While at the summit, Moonves described the #MeToo movement as a “watershed” moment. He also talked about the importance of establishing a company culture that discourages all types of harassment while making it safe for victims of mistreatment to come forward.
The Innovative Summit appearance took place on November 29, 2017. Eight months later, news broke of both assault and sexual assault allegations against the top man at CBS. Stock for CBS fell 6% on the day the allegations became known to the public and another 5% three days after the announcement.
Officers and directors of a publically traded company are required to timely disclose material information regarding the company. The price of a stock in an efficiently traded market will reflect all material facts regarding, among other things, the company’s management and future prospects The lawsuit alleges that investors were misled because the alleged misrepresentation regarding the facts surrounding Moonves undermined the integrity of CBS stock prices.