BOSTON -- Boston-based FMR Co. is fully covered for the $10 million settlement it has reached in a class-action lawsuit over a comment made by a former Magellan Fund manager about the value of a company's shares held by the fund.
Jeff Vinik, who managed Magellan in 1995, informed fund shareholders in a Sept. 30 semi-annual report that the fund continued to be optimistic about technology stocks and that shares of Micron Technology in particular remained "relatively cheap."
A class of Micron shareholders who purchased their stakes between Nov. 9 and Nov. 30 that year alleged Mr. Vinik's comments were an effort to manipulate Micron's stock price so Magellan could easily sell its Micron stake at a substantial profit. That alleged manipulation, which is prohibited by federal law, financially harmed the several thousand class members, the lawsuit claimed.
From Sept. 30 to Nov. 9, 1995, Micron's share price increased substantially because of Mr. Vinik's comments, said Glen DeValerio, the plaintiffs' attorney. But instead of holding its stake, the Magellan Fund sold about 2 million of its 15 million Micron shares during that period, said the attorney, a partner with Berman, DeValerio & Pease L.L.P. of Boston.
After Nov. 9, the Magellan Fund unloaded the remainder of its Micron stake. The sell-off prompted a slide in Micron's stock price, but not as precipitous a decline as the stock would have suffered had Mr. Vinik not made his remarks in the report, Mr. DeValerio said.
FMR said in statement that it agreed to the settlement, which is subject to court approval, to avoid costly, disruptive litigation. Fidelity does not admit to any wrongdoing.
Mr. Vinik left Fidelity in 1996.