Disclosure of merger discussions

• For purposes of Rule 10b-5 context, adopts standard of materiality set forth in TSC Industries Inc v Northway Inc 426 US at 449 96 S Ct at 2132
• Rejects "agreement-in-principle as to price and structure" as the bright-line rule for materiality
• Reject the proposition that "information becomes material by virtue of a public statement denying it."
• Materiality in the merger context depends on the probability that the transaction will be consummated, and its significance to the issuer of the securities. Materiality depends on the facts and thus is to be determined on a case-by-case basis.

Fraud-on-the-market theory

• Adopts a presumption of reliance supported by the fraud-on-the-market theory
• That presumption, however, is rebuttable

Opinion 485 US 224  US 1988

Factual background I

Legal background II

Materiality in the context of mergers III

• Agreement-in-principle test III.A
• Sixth Circuit test III.B
• TSC Industries test III.C

Reliance IV

• Fraud on the market theory IV.A
• Presumptions IV.B
• Rebutting presumptions IV.C

Conclusion V

Dissent

• White and O'Connor dissent from Section IV

• Concur with Section III

• Text of dissent