In 2000, more than 200 million registered shares in Deutsche Telekom were publicly offered, accompanied by a voluntary prospectus. Shortly after the public offering, many shareholders sued Deutsche Telekom for damages arising from an alleged incorrect prospectus in accordance with German law applicable at the time. Investors claimed, inter alia, that Deutsche Telekom had included a wrong value of its real estate and had misrepresented an accounting profit resulting from an inter-group "sale" of shares in the U.S. company Sprint to a subsidiary. With its decision dated 21 October 2014, the German Federal Court of Justice has ruled that the prospectus issued by Deutsche Telekom was at least partially incorrect.
The Court ruled that although the evaluation of the company's real estate deviated from its actual value, evaluations of real estate are always estimates, as there is no "true" value of real property. The Court pointed out that slight deviations within an acceptable range did not make the prospectus incorrect. Definition of such range lies within the judgment of the courts. In similar cases, deviations of 18% and 20% have been ruled acceptable. The method of evaluation needs to be disclosed only if knowledge of the method is relevant for the investor's decision, for example if the evaluation method may produce inaccurate results. The Court ruled that these provisions were upheld in the prospectus.
However, in the Court's opinion the prospectus contained an incorrect presentation regarding the accounting profit booked after the inter-group transfer of Sprint shares to a subsidiary, as the transfer was referred to as a "sale" in the prospectus, whereas the shares had effectively been transferred to the subsidiary by way of a capital injection. According to the Court, the use of the expression "sale" rather suggested that the accounting profit resulted from the payment of a sale price to Deutsche Telekom and left the investor oblivious to the fact that Deutsche Telekom still carried the risk of a depreciation of Sprints stock, a depreciation that took place after the public offering.
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