Opinion ID: 350232
Heading Depth: 2
Heading Rank: 1

Heading: The Bear Market on B & L

Text: 32 Before dissecting separately each item of allegedly material information, we will lay to rest the SEC's facile inference that since B & L's stock dropped 113/4 points on March 16th with an unprecedented volume of 348,000 shares traded, all the information conveyed by Schuman must per se have been material. 33 The seemingly substantial decline in the value of B & L's stock on March 16th, was not an uncommon phenomenon in the company's recent history. B & L's shares had been generally falling in value since early February, and in the three weeks preceding the interviews, prices had plunged 40 points. On February 23rd and 24th, B & L stock had tumbled over 19 points, more than half of this occurring on one day alone. On March 1st, the price of a B & L share slid 171/2 points; and on March 15th, a full day before Schuman's disclosures could conceivably have affected the market, B & L tumbled 81/8 points, amidst reports that the Senate planned to investigate its monopolistic stranglehold on the soft contact lens market. 34 Several reasons accounted for the general decline, the most prominent being adverse medical reports on the safety of soft contact lenses which were accorded extensive coverage in the Wall Street Journal and other sources of financial news. Moreover, reports abounded that B & L might soon face substantial competition. Leakage in the Soflens shipping vials in early March, and ensuing delays in shipment, likewise received considerable publicity. Smith Barney & Co.'s withdrawal of its buy recommendation on B & L in late February further dampened investor ardor with the company's stock. In short, the market was extremely bearish on B & L. 35 The coup de gr ace was seemingly delivered on March 15th when it was reported that Warner-Lambert, the parent of B & L's principal competitor, was negotiating to acquire the Griffin lens patent for production in the United States. Ronald Labow, whose sale of 100,000 shares constituted nearly one-third of the tremendous volume of trading in B & L stock on March 16th, testified that the Warner-Lambert announcement was the sole reason for his action. In addition, another quarter of the shares traded that day were sold by the Brokaw firm, a sale precipitated, Judge Ward found, not by the information divulged by Schuman, but by his steadfast refusal to adopt the marketing techniques proposed by the Brokaw analysts. 36 Finally, it is fair to assume the rumors that B & L had divulged a $.60 earnings estimate for the first quarter to Faulkner, Dawkins & Sullivan, combined with Schuman's revelation of the actual earnings estimate before the close of trading, a disclosure Judge Ward found material, also impacted B & L stock prices on March 16th. We are therefore convinced that these factors, and not the other disclosures that the SEC asserts were material, were entirely sufficient to precipitate the drop in value of B & L's stock on March 16th.