Written By: Andreas Warkentin, LL.M. oec. int. – German Attorney at Law, Certified Banking & Capital Markets Law Specialist
WINHELLER Attorneys at Law
Frankfurt am Main, Germany
In the prospectus liability proceeding against Telekom and against the Federation and the econstruction Loan Corporation Bank, the plaintiff investors have suffered an initial defeat. In the view of the Frankfurt Higher Regional Court, the sales prospectus from the year 2000 contained no errors.
The plaintiff shareholders had asserted altogether around 80 million Euro in compensation for damages due to alleged insufficient indications of risk in the prospectus regarding the initial public offering of Telekom. Those responsible for the prospectus were accused of misvalued real estate assets and faulty information regarding entry into the U.S. market. The stock, which was several times oversubscribed and acquired above all by private investors, crashed from initially 63.50 Euro and is at present priced at around 8 Euro.
However, the Higher Regional Court rejected the complaint on all points. In the view of the Senate, a reader of the prospectus who was knowledgeable about balance sheets could find all of the relevant information in the prospectus.
Because a wave of actions by small shareholders had been filed since 2001 against Telekom at the Frankfurt Regional Court, which threatened to paralyze the court, a new law specifically – the Capital Markets Model Case Act – was enacted. Thus, the decisive legal questions could be submitted with a model complaint to the Frankfurt Higher Regional Court. This proceeding has now found a preliminary end with the judgment of May 16, 2012.
However, the decision of the Frankfurt Higher Regional Court is not yet final, the model plaintiff has already filed an appeal at the Federal Court of Justice.
Frankfurt Higher Regional Court, Judgment of May 16, 2012, Case 23 Kap 1/06.