On November 24, 2021, the U.S. Court of Appeals for the Second Circuit issued a pair of decisions addressing threshold requirements for securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5: (i) pleading a material misstatement or omission, and (ii) demonstrating standing to sue as a “purchaser” or “seller” of a security. In Altimeo Asset Management v. Qihoo 360 Technology Co. Ltd.,1 the Court reinstated Section 10(b) claims premised on the defendants’ alleged failure to disclose in proxy materials a plan to relist the post-merger company on a foreign exchange. In so ruling, the Court parted ways with the district court, which concluded that the proxy materials adequately disclosed the “possibility” of a relisting, and the plaintiffs failed to allege a “concrete” pre-merger relisting plan so as to render the disclosure misleading. In Aiello v. Brown,2 the Court clarified that holders of unexercised preemptive rights to acquire securities—absent “irrevocable liability” to acquire a security—lack standing to assert Section 10(b) claims. We discuss these decisions and the implications for securities litigants below.
Qihoo 360 Technology Co. Ltd. was an internet security company headquartered in Beijing, China, which, since 2011, had listed American...
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