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
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In a recently released milestone decision, the Swiss Federal Supreme Court held, for the very first time, that the duty of financial intermediaries to report suspicions of money laundering...
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).