Private Securities Litigation Reform Act's Essay

Private Securities Litigation Reform Act's - Essay Example Plaintiffs also allege that they incurred substantial personal losses due to their respective purchases of Daou stock at fraudulently inflated prices (2005). The district court held that the plaintiffs had failed to state sufficiently particularize claims under the 1933 Securities Act and the 1934 Exchange Act (2005). Hence, Plaintiffs now appeal the district courts dismissal of their Third Amended Complaint (â€Å"TAC†) with prejudice (2005). Plaintiffs contend that Daou fraudulently inflated the price of its stock by reporting revenues before they were earned, in violation of GAAP (2005). They claim that the said company employed an accounting method known as the percentage-of-completion (â€Å"POC†) method, which is used primarily to account for progress on long-term projects (2005). Under this method, revenue from these projects could only be recognized based on the percentage of labor costs incurred to date compared to the total estimated labor costs for the project (2005). Plaintiffs allege, however, that defendants would prematurely recognize revenue in contravention of the POC method (2005). Hence, because of such artificial inflation of the price of Daou stock, Plaintiffs allege that Daou was able to acquire eleven companies, and Daou executives and their respective family members were able to sell nearly 2.5 million shares for a total of $54.67 million in improper proceeds (2005). Plaintiffs also allege th at to their detriment they purchased their Daou shares during the class period at artificially inflated prices and that, had they been aware of Daous true financial results and condition, they would not have purchased their shares, or at least not at the prices paid (2005).