Barclays Plc may face a revived U.S. lawsuit over its disclosures connected with a 2008 stock offering after a federal appeals court said a lower court judge erred in refusing to let the case proceed.
A panel of the 2nd U.S. Circuit Court of Appeals in New York said investors in a $2.5 billion offering of American depositary shares in April 2008 may pursue claims that Barclays failed to adequately disclose its exposure to credit market risks and misled investors about its risk management.
The offering came just four months before Barclays took a writedown of 2.8 billion pounds. Soon after the writedown, it announced a large capital-raising plan.
"In a quickly deteriorating credit market, we believe the particulars about a firm's exposure to that market could assume a level of importance, and hence materiality, that may not have been the case in less economically stressful times," Circuit Judge Barrington Parker wrote for the two-judge panel.
The court also upheld the dismissal of similar claims over three offerings totaling $2.95 billion between April 2006 and November 2007, saying the plaintiffs waited too long to sue.
Investors had sought class-action status on behalf of purchasers of 218 million Callable Dollar Preference Shares of Barclays Bank Plc, which were priced at $25 each.
According to the decision, the price of the shares fell to between $5 and $7 by March 2009.
Barclays spokesman Brandon Ashcraft declined immediate comment. Joseph Daley, a partner at Robbins Geller Rudman & Dowd representing the plaintiffs, did not immediately respond to requests for comment.
The lawsuit is one of many accusing major banks of concealing their exposure to risky mortgage-backed securities and collateralized debt obligations that tumbled in value during the credit and financial crises that peaked in 2008.
The case is Freidus et al v. Barclays Bank Plc et al, 2nd U.S. Circuit Court of Appeals, No. 11-2665.