From Simeon: "In June of 1983, my parents purchased $15,000 worth of Seagate, 750 shares at 19 5/8. They sold those shares at 6 1/4, losing $10,360 in the deal. In August of 1989 they received information about a class action lawsuit, but the letter said that nothing needed to be sent in at that time. Nothing else was ever heard from the lawyers, and it was assumed that the case was lost. My mother was watching the news one evening in 1995 and she heard about the class action lawsuit — and that it had been successful. She was very upset and called the law firm responsible for the suit. They sent her a claim form, but said they did not have her on record of being a claimant. She would be considered a "late applicant." We had never heard anything from them informing us before that we needed to send them anything! In August of 1995 we sent in the claim form, with proof of purchase. From there the case has been a dead end.
"Any help or advice would be greatly appreciated. If you help us in recovering any money, not only will you make two anti-smoking activists/professors very happy (they have your book on the shelf), but we’ll also send you 10% of it.
"P.S. Why am I, a 20-year-old college senior, pursuing this case for my parents? Because I think it is terrible what happened to them. They got burned as novices in the stock market by this company which didn’t disclose their financials honestly, and now they will never touch the market again. Hasn’t stopped me, though."
Sorry I can’t be of help — if the law firm that handled the class action isn’t helping, I can’t either. But at the risk of making you REALLY mad, and without knowing all the facts, I’d suggest that this may not be quite the case of good and evil it seems.
Investing in any small high-tech stock, as Seagate was back then, is risky. Had your folks held on, they would have made a big profit. The fact that they bought at a high price on the promise of a bright future — but then lost money when they sold at the bottom because there was a scary disappointment along the way — is not necessarily someone else’s fault. SEA’s future, as it turns out, WAS very bright — your folks were right to buy into its long-term promise.
The question, clearly: Did SEA purposely mislead people about that quarter’s results (or whatever). I have no idea. But I do know how hard it is to foretell the future of anything, let alone the profits of a then small disk drive company in a wildly evolving, zooming, competitive market. So maybe they were just carried away with their optimism — which did ultimately prove more than justified — rather than trying to bilk your folks out of money that should have been safe and sound in a speculative growth stock. Safe and sound and speculative growth stock are just not phrases that properly belong together.
The last thing to say, incidentally, is that — to my knowledge (which may be wrong) — SEA never lost such a suit; they settled one. The difference being that, in the real world, maddening as it is, innocent parties really do wind up settling suits frequently. (Of course, guilty-as-sin parties do, too.) If you can settle a $100 million suit for less than the legal costs to win it — and at the same time protect your shareholders from the outside chance of a crazy verdict (juries are not immune to being misled on occasion) and protect your management from having to divert attention from selling more/better disk drives, the logical thing to do, sadly, is settle.
It sets a very bad precedent, of course. And it offends our sense of justice. We want to know for sure whether the party was guilty or innocent — and have him pay through the nose if guilty and be fully reimbursed for the lawsuit if innocent. But in the real world, it just doesn’t work this way. (Nor is guilt or innocence in a matter like this always clear-cut. Where does optimism end and fraud begin?)
I really don’t know whether SEA purposely misled your folks. But if you’ve researched the company, you can see it was not exactly some total scam — it’s today grown to be, I think, the largest disk drive manufacturer in the world, or something like that.
(And how come you’re only offering 10%? The lawyers who sue SEA, et al, normally take a heck of a lot bigger slice than that! Which is one reason that, along with lots of good suits that should be brought, there seem to be even more that shouldn’t be, but are to extort a settlement.)
(And one last thing. If this is the settlement I think it may be — sorry I haven’t had time to check for sure — I believe the lawyers settled for something like 9 cents on the dollar, which would mean $900 for your parents, less a third to the lawyers. It amounted to maybe $3 million to the lawyers, but $600 to folks like your parents. So, if it’s any consolation, it’s not as if by missing a notice of the suit your folks left $10,000 on the table.)
I know this is a controversial topic. As usual, all comments welcome.