Professor Brad Cornell of the California Institute of Technology testified Wednesday for the defense in the Sydney, Australia, class action suit against gaming giant Aristocrat Leisure Ltd. The finance expert witness said only part of the 57 per cent fall in Aristocrat Leisure’s share price in February 2003 could be attributed to previously undisclosed bad news. The Sydney Morning Herald also reports:
Brad Cornell, from the California Institute of Technology, said sellers were also affected by the belated discovery that Aristocrat’s then management was “dishonest and incompetent”. When new executives were installed, the share price partly recovered.
The shareholders’ expert witness, the New York econometrician Fred Dunbar, argued that almost all the share price fall could be attributed to the effect on earnings of the new information. He said the share price would have fallen by the same 57 per cent, albeit in stages, if Aristocrat had announced lower – correct – profits in February and August 2002 and if it had righted an inflated profit forecast in December 2002.