Full opinion text
OPINION LECHNER, District Judge. This is a consolidated class action brought on behalf of all purchasers of Class A common stock of MobileMedia Corporation (“MobileMedia”) (“MobileMedia Stock”) during the period running from 29 June 1995 to 27 September 1996 (“the Class Period”) (the “Section 10(b) Class”) and all purchasers of Mobile Media Stock or 9-3/8% Senior Subordinated Notes due in the year 2007 (the “Notes”) issued in an offering (the “Secondary Offering”) pursuant to a prospectus (the “Secondary Offering Prospectus”) and registration statement (the “Secondary Offering Registration Statement”), dated 7 November 1995, (the “Secondary Offering Class”). The consolidated amended complaint (the “Amended Complaint”) alleges violations of section 11 (“Section 11”), as amended 15 U.S.C. § 77k, section 12(a)(2) (“Section 12(a)(2)”), as amended 15 U.S.C. § 771(2), section 15 (“Section 15”), as amended 15 U.S.C. § 77o, of the Securities Act of 1933 (the “Securities Act”). See Amended Complaint at ¶¶ 117-143, Counts 1-3. The Amended Complaint further alleges violations of section 10(b) (“Section 10(b)”), as amended 15 U.S.C. § 78j(b), and section 20 (“Section 20”), as amended 15 U.S.C. § 78t, of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 (“Rule lobs’’) of the Securities and Exchange Commission (“SEC”), 17 C.F.R. § 240.10b-5. See Amended Complaint at ¶¶ 144-163, Counts 4-5. Federal question jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337 is alleged based upon Section 22 of the Securities Act, as amended 15 U.S.C. § 77v, and Section 27 of the Exchange Act, as amended 15 U.S.C. § 78aa. See Amended Complaint at ¶ 14. Presently pending is the Defendants’ motion to dismiss the Amended Complaint for failure to state a claim (the “Motion to Dismiss”) pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below the Motion to Dismiss is granted as to the allegations contained in paragraphs 54 and 90 to 92 of the Amended Complaint. In all other respects, the Motion to Dismiss is denied. Facts A. The Parties 1. MobileMedia (no longer named as a party) MobileMedia is a Delaware corporation with its principal offices and corporate headquarters in Ridgefield Park, New Jersey. See Amended Complaint at ¶ 19(b). Mobi-leMedia was incorporated in September 1993 to acquire the paging business of Metrome-dia Telecommunications, Inc. See id. at ¶ 19(c). MobileMedia became a public company on 29 June 1995 in an initial public offering of more than eight and three-quarters million shares of MobileMedia Stock (the “IPO”). See id. In August 1995, MobileMe-dia acquired Dial Page, Inc. (“Dial Page”), a regional paging company operating primarily in the southeastern United States. See id. at ¶ 19(e). In September 1995, Mobile acquired Mobile Communications Corporation of America (“MobileComm”), a subsidiary of BellSouth. See id. MobileMedia is not named as a defendant in this matter because litigation concerning MobileMedia was stayed following the filing of a petition for bankruptcy by MobileMedia on 30 January 1997. See Amended Complaint at ¶ 19(a). As of 15 March 1996, there were approximately forty-five million shares of MobileMe-dia stock outstanding. See Amended Complaint at ¶29. These shares were held by 222 record owners on behalf of thousands of beneficial owners throughout the United States. See id. In addition, 15,525,000 shares of MobileMedia Stock and $250 million of MobileMedia Notes were sold in the Secondary Offering. See id. 2. The Rule 10b-5 Class During the Class period, the following purchased shares of MobileMedia Stock in the open Market: Plaintiff Purchase Date Price No. Shares Norman Bobrow 23 August 1995 $24.50 700 Dr. David Kirschner 8 November 1995 24.50 500 Defined Benefit 9 January 1996 21.87 500 Pension Plan & Trust 7 June 1996 14.625 1000 12 August 1996 9.025 2000 Lawrence Robbins 11 December 1995 26.00 1000 10 January 1996 21.125 500, Sidney Isaacs 3 April 1996 20.375 1000 12 July 1996 20.00 2000 Lenore Isaacs 11 June 1996 14.875 2000 13 June 1996 13.375 2000 Samuel Tave 13 June 1996 13.375 3000 Jackson Hawkins 27 August 1996 6.87 200 Vincent Romei 18 January 21.25 1000 See Amended Complaint at ¶ 17. These Plaintiffs (the “Section 10(b) Plaintiffs”) seek to represent the Section 10(b) Class and bring Counts TV and V of this action. See id. at ¶ 28(a). The Section 10(b) Plaintiffs and the members of the Section 10(b) Class allege they relied upon materially false and misleading reports, press releases and public statements made by MobileMedia and were damaged as a result. See id. at ¶ 17(b). 3. The Secondary Offering Class The following Plaintiffs purchased MobileMedia Stock in the Secondary Offering (the “Secondary Offering Plaintiffs”): Plaintiff Date of Purchase Price No. Shares Howard Fienman DDS PA Pension 7 November 1995 $23.75 300 Plan Trust Vincent Romei 7 November 1995 23.75 2000 See Amended Complaint at ¶ 18(a). These Plaintiffs (the “Secondary Offering Plaintiffs”) seek to represent the Secondary Offering Class and bring Counts I, II and III of this action. See id. at ¶ 18(b). 4.The Officer and/or Director Defendants Gregory M. Rorke (“Rorke”) was Chief Executive Officer of Mobile Media from October 1994 to approximately 27 September 1996, when he resigned. See Amended Complaint at ¶ 20. Rorke was a director of Mobi-leMedia from May 1995 until shortly after his resignation as CEO in September 1996. See id. Rorke signed the IPO and Secondary Offering Registration Statements and the SEC Form 10-k for the fiscal year ended 31 December 1995 (the “1995 Form 10-k”) filed with the SEC 1 April 1996. See id. John M. Kealey (“Kealey”) was President of MobileMedia from October 1994 to 15 September 1996, when he resigned. See Amended Complaint at ¶ 21. Kealey was a director of MobileMedia, and President and Chief Operating Officer of a MobileMedia subsidiary, from December 1993 until his resignation as President in September 1996. See Amended Complaint at ¶21. Kealey signed the IPO and Secondary Offering Registration Statements and the 1995 Form 10-K. See id. David A. Bayer (“Bayer”) has been a director of MobileMedia since February 1994. Bayer was named Chairman of the Board of Directors on 15 July 1996. See Amended Complaint at ¶ 22. From 15 July 1996 to 3 September 1996, Bayer also served as interim CEO of MobileMedia. See id. Bayer signed the IPO and Secondary Offering Registration Statements and the 1995 Form 10-K. See id. Santo J. Pittsman (“Pittsman”) was the Vice President and Chief Financial Officer of MobileMedia during all periods relevant to the instant action. See Amended Complaint at ¶ 23. Pittsman signed the IPO and Secondary Offering Registration Statements and the 1995 form 10-K. See id. Kenneth R. McVay (“McVay”) was the Secretary and Senior Vice President and General Counsel of MobileMedia at all relevant times. See Amended Complaint at ¶ 24. McVay signed amendments to the annual reports of MobileMedia on SEC Forms 8-K (“Form 8-K”), including a Form 8-K filed on 19 July 1996 (the “1996 Form 8-K”). See id. McVay is also alleged to have authorized the signing of various certifications and representations concerning the compliance by Mo-bileMedia with the Federal Communications Commission (the “FCC”) rules and regulations, including certifications and representations required by the FCC and the creditors of MobileMedia. See id. Defendants Rorke, Kealey, McVay, and Bayer, by reason of their “direct and substantial management position and responsibilities during the time relevant to [the Amended Complaint],” are alleged to be controlling persons within the meaning of Section 20 of the Exchange Act and section 15 of the Securities Act. See Amended Complaint at ¶ 25. 5. The Outside Director Defendants Clifford A. Bean, John L. Bunce (“Bunce”), Jr., Mitchell R. Cohen (“Cohen”), Tully M. Friedman (“Friedman”) and Kenneth P. Mitchell (collectively, the “Outside Director Defendants”) were, at all relevant times, directors of MobileMedia. See Amended Complaint at ¶26. The Outside Director Defendants, either individually or through an attorney, signed the IPO and Secondary Offering Registration Statements. See id. Bunce, Cohen and Friedman are also alleged to be controlling persons within the meaning of Section 15 of the Securities Act. See id. They are general partners in Heilman & Friedman Capital Partners II, L.P., H & F Orchard Partners, L.P., H & F International Partners, L.P., and H & F MobileMedia Partners, partnerships that, after the Secondary Offering, controlled 57.2 percent of the aggregate voting power of all MobileMedia Stock. See id. All of the Outside Directors are named as Defendants in Counts I — II. See id. Bunce, Cohen and Friedman are named as defendants in Count III as well. See id. 6. The Underwriter Defendants Lehman Brothers, Goldman, Sachs & Co., Donaldson Lufkin, & Jenrette Securities Corporation and Smith Barney Inc. (collectively, the “Underwriter Defendants”) are named as defendants in this action because of their involvement in the Secondary Offering. See Amended Complaint at ¶27. The Underwriter Defendants were the lead underwriters in the Secondary Offering. See id. B. Procedural History The current action is a consolidation of numerous actions filed in the New Jersey district courts. The Plaintiffs filed the Amended Complaint on 24 November 1997. Answers were filed by the Defendants on 19 December 1997. C. Background Plaintiffs allege that defendants violated the Securities Act, as amended 15 U.S.C. § 77a et seq., and/or the Exchange Act, as amended 15 U.S.C. § 78a et seq. by failing to disclose (1) certain integration problems that MobileMedia allegedly had following its acquisitions of Dial Page and MobileComm and (2) certain false filings submitted to the FCC. MobileMedia provides local, regional and national paging services to approximately four and one-half million subscribers. See Amended Complaint at ¶ 36. The paging operations of MobileMedia are subject to regulation by the FCC. See id. at ¶ 38. For example, MobileMedia must obtain licenses from the FCC for the use of radio frequencies necessary to conduct its business. See id. In addition to the FCC licenses, the paging business of MobileMedia also required the creation of a network of transmitters. See id. at ¶ 39. The transmitter network was needed to send the radio signals to the pagers from a central control unit. See id. In the first quarter of 1995, the FCC authorized MobileMedia to construct in excess of 300 transmitter stations. See Amended Complaint at ¶ 40. The FCC required these stations be constructed and placed into service within one year or the authorization would be forfeited. See id. Section 22.142 of the FCC Rules mandates notification to the FCC by the filing of FCC Form 489 (“Form 489”) when a paging station is completed and placed into service. See id. at ¶ 41. This notice must be filed no later than fifteen days after the station has been placed into service. See id. If a licensee fails to complete construction and place a station into service before the one year deadline, then the FCC authorization automatically terminates. See id. 1. The Allegedly False and Misleading IPO Registration Statement and Prospectus MobileMedia became a public company on June 29, 1995 in an initial public offering conducted pursuant to a registration statement (the “IPO Registration Statement”) and prospectus (the “IPO Prospectus”) filed with the SEC. See Amended Complaint at ¶ 42. in the IPO, MobileMedia sold 8,640,000 shares of stock at $18.50 per share. See id. These funds were raised to enable MobileMe-dia to purchase Dial Page. See id. Approval of the FCC was required for the acquisition of Dial Page by MobileMedia. See at ¶ 43. A prerequisite for such approval was compliance with FCC rules and regulations. See id. Addressing this subject, the IPO Registration Statement stated: The FCC licenses granted to [MobileMe-dia] are for varying terms of up to 10 years, at the end of which renewal applications must be approved by the FCC. In the past, paging license renewal applications generally have been granted by the FCC in most cases upon a demonstration of compliance %vith FCC regulations and adequate service to the public.... The FCC has granted each renewal license for which [MobileMedia] has filed. Although [MobileMedia] is unaware of any circumstances which would prevent the grant of pending or future renewal applications, no assurance can be given that any of [MobileMedia’s] licenses will be renewed by the FCC. Furthermore, the FCC has the authority to restrict operation of licensed facilities or revoke or modify licenses. None of [MobileMedia’s] licenses has ever been revoked or modified involuntarily. The Communications Act requires licensees such as [MobileMedia] to obtain prior approval from the FCC of the assignment or transfer of control of any construction permit or station license or any rights thereunder, including in the context of acquisitions of other paging companies by [MobileMedia] and transfers by [Mobi-leMedia] of a controlling interest in any of its licenses or construction permits or any rights thereunder. Whenever FCC approval is required, any interested party may file a petition to dismiss or deny the application for renewal or approval of a proposed transfer. The FCC has approved each acquisition and transfer of control for which [MobileMedia] has sought approval. The Company also regularly applies for FCC authority to use additional frequencies, modify the technical parameters of existing licenses, expand its service territory and provide new services. Although there can be no assurance that future requests for approval or applications filed by [MobileMedia] will be approved or acted upon in a timely manner by the FCC, or that the FCC will grant such requests or application, [MobileMe-dia] knows of no reason to believe any such requests or applications will not be granted. Id. (emphasis in Amended Complaint) (quoting MobileMedia IPO Registration Statement). Plaintiffs allege that the IPO Registration Statement and Prospectus were materially false and misleading. Plaintiffs contend “they represented that MobileMedia was in compliance with FCC rules and regulations when, in fact, it was not.” See Amended Complaint at ¶ 44. Plaintiffs further allege that MobileMedia engaged in a regular practice, since the inception of the company, of filing false and illegal Forms 489. See id. These false filings are alleged to include filings submitted before 29 June 1995 for stations that either had not been constructed or for stations that had been operational for more than fifteen days. See id. 2. The Allegedly False and Misleading H- September 1995 Press Release Mobile Media issued a press release on 14 September 1995 (the “14 September 1995 Press Release”) over the Dow Jones New-swire announcing the intention to acquire MobileComm. See Amended Complaint at ¶ 45. The 14 September 1995 Press Release quoted Rorke as stating: “This acquisition represents a breakthrough in the personal communications industry.... The combined entity will have two nationwide one-way wireless networks, two nationwide narrowband two-way PCS licenses, a sales presence in 85 of the top 100 markets, an extensive retail distribution network that encompasses more than 15,000 stores and the most efficient back-office in the industry— a great combination. “Our recent Dial Page acquisition along with this pending acquisition accelerates our corporate objective — to create the preeminent unreless messaging company by combining economies of scale in our spectrum and sales coverage along with first class customer service.” Amended Complaint at ¶45 (emphasis in Amended Complaint) (citing 14 September 1995 Press Release). The 14 September 1995 Press Release is alleged to be materially false and misleading because it “boasted of the apparently seamless synergies and economies of scale of integrating MobileComm into MobileMedia.” See Amended Complaint at ¶ 46. Plaintiffs allege the retail market of MobileMedia was fundamentally different from the business-customer focus of MobileComm. See id. These differences are alleged to have prevented the realization of any economies of scale. See id. Plaintiffs further allege Mobi-leMedia admitted it was experiencing difficulty integrating Dial Page, a smaller company than MobileComm, at the time of the 14 September 1995 Press Release. See id. 3. Alleged Problems Tracking License Authorizations and Construction Status. Belardi, at all relevant times, was Regulatory Counsel for Mobile Media. See Amended Complaint at ¶ 47. Under the supervision of McVay, Belardi was responsible for tracking the station applications, authorizations and construction status to ensure Mo-bileMedia made appropriate filings with the FCC. See id. Plaintiffs allege, beginning in the third quarter of 1993, Belardi knowingly filed false Forms 489 with the FCC. See Amended Complaint at ¶49. Plaintiffs further allege that forty-nine of the two hundred forty-five Forms 489 filed with the FCC between 11 October 1993 and 31 December 1995 were false. See id. Belardi had created a tracking system so he would know when Forms 489 needed to be filed with the FCC. See Amended Complaint at ¶¶ 48-49. Plaintiffs allege in the Fall of 1995, this tracking system began to fail because of difficulties MobileMedia was experiencing integrating Dial Page and Mo-bileComm. See id. 4. The Allegedly False and Misleading Secondary Offering Registration Statement and Prospectus On 7 November 1995, the Secondary Offering Registration Statement was declared effective by the SEC. See Amended Complaint at ¶ 52. Pursuant to this registration statement, MobileMedia, through the Underwriter Defendants, sold 15,525,000 of stock. See id. The proceeds of this offering totaled $368,718,750. See id. Concurrent with the Secondary Offering of MobileMedia Stock, MobileMedia Communications, Inc., the principal operating subsidiary of MobileMedia, offered notes to the public. See id. The proceeds from the Notes totaled $250 million. Plaintiffs allege the Secondary Offering Registration Statement and Prospectus portrayed MobileMedia as a rapidly expanding paging company with a strategy for sustaining and increasing profitability. See Amended Complaint at ¶53. Plaintiffs further allege the Secondary Offering Registration Statement and Prospectus described Mobi-leMedia as “well positioned to thrive and prosper because of its resources.” See id. at ¶ 54. The Secondary Offering Prospectus stated: Management believes that future success in these markets will depend upon satisfying business and individual consumers’ demand for advanced personal messaging, wireless data applications and next-generation two-way narrowband PCS at competitive rates. [MobileMedia] believes to meet these demands, successful wireless communications companies must have sufficient spectrum capacity, national sales coverage through multiple distribution channels and operational economies of scale. [MobileMedia] believes that it will be one of a limited number of companies that will have these resources. ****** On August 31, 1995, [MobileMedia] completed its acquisition of the paging and wireless messaging business of Dial Page for a purchase price of $188.5 million, comprising cash and the assumption of the $85.0 million aggregate principal amount of and accrued interest on the Dial Page Notes. ****** [MobileMedia] builds and operates wireless messaging and communications systems, and generates revenues from the provision of paging and other wireless communications services. During 1994, [MobileMe-dia] made a number of key additions to its senior management team. This team has redefined [MobileMedia’s] objective and operating strategy, which incorporates four initiatives: (i) Spectrum and Systems, (ii) Sales Force and Services, (iii) Scale Economies and (iv) Strategic Alliance. In the past year, management’s initial steps to implement these initiatives have included: (i) commencing the construction of its nationwide wireless network, purchasing licenses for a nationwide two-way narrow-band PCS wireless network and commencing the upgrade of its paging terminal infrastructure, (ii) reaching an agreement to acquire MobileComm and completing the Dial Page Acquisition, (iii) increasing its investment in the reseller distribution channel by nearly doubling its reseller sales force, and (iv) consolidating its customer service and credit collection centers. Amended Complaint at ¶¶ 53-55 (emphasis in original) (citing Secondary Offering Prospectus at 4-5, 23). Plaintiffs allege these statements in the Secondary Offering Prospectus were materially false and misleading because they failed to disclose MobileMedia was experiencing difficulties integrating Dial Page into its operations. See Amended Complaint at ¶ 56. Plaintiffs contend these integration problems forced MobileMedia to focus on Dial Page at the expense of its other operations. See id. Plaintiffs further contend MobileMedia falsely portrayed its growth strategy as successful when it was not. See id. 5. The False FCC Filings of MobileMe-dia Plaintiffs allege, in addition to failing to disclose difficulties MobileMedia was experiencing integrating Dial Page, the Secondary Offering Registration Statement and Prospectus failed to disclose MobileMedia had filed false Forms 489. See Amended Complaint at ¶ 59. By December 1995, Belardi is alleged to have been aware a number of authorized stations would not be built within the time frame required by the FCC. See Amended Complaint at ¶ 69; 15 October 1996 Report at 11. In December 1995 of January 1996, Belardi is alleged to have informed McVay of the problem concerning the expiring licenses. See Amended Complaint at ¶ 70; 15 October 1996 Report at 12. Plaintiffs allege Belardi suggested to McVay the only viable solution was to timely file the Forms 489 and confirm or complete construction at a later date. See Amended Complaint at ¶70; 15 October 1996 Report at 12 (Belardi described the proposed inaccurate filings as technical violations, which if discovered would invoke only limited sanctions). Plaintiffs further allege McVay told Belardi to propose this plan to the Board for approval. See id. Belardi purportedly received approval for this proposal from Rorke and Kealey at a senior staff meeting in either December 1995 or January 1996. See id. at ¶ 71. The 15 October 1996 Report concerning the false FCC filings stated: Belardi proceeded to prepare, certify and file an unprecedentedly large number of Forms 489 during the first quarter of 1996. Specifically, some 371 Forms 489 were submitted. To the best of our knowledge, all of these Forms 489 were signed personally by Belardi and all were made through his office. At the time the filings were made, Belardi apparently did not know precisely which stations were in fact constructed and which were not. Amended Complaint at ¶ 73 (quoting 15 October 1995 Report). The 15 October 1995 Report further states Belardi continued to file false Forms 489 after the first quarter of 1996. See 15 October 1996 Report at 16. Of 'the sixty-five Forms 489 filed by Belardi after the first quarter of 1996, sixteen were false. See id. 6. Alleged Misrepresentations in Mobi-leMedia Credit Agreements Plaintiffs contend the filing of false Forms 489 rendered statements concerning the credit agreement (the “Credit Agreement”) between MobileMedia and various banks, and included in the Secondary Offering Prospectus and Registration Statement, materially false and misleading. See Amended Complaint at ¶ 62. These credit agreements provided funds for the acquisition of Mobile-Comm. See id. ¶ 63. The Credit Agreement provided: “All of the material properties, equipment and systems owned, leased or managed ... are, and (to the best of the knowledge of the Borrower) all such property, equipment and systems to be acquired or added in connection with any contemplated system expansion or construction will be in good repair, working order and condition and are and will be in compliance mth all terms and conditions of the FCC licenses and all standards and rules imposed by any Governmental authority. “The FCC Licenses and PUC Authorizations set forth on an attached schedule are valid and in full force and effect except for ... any such Authorization the absence of which could not reasonably be expected to have a Material Adverse Effect. No event has occurred which could (I) result in the imposition of a material forfeiture or the revocation, termination or adverse modification of any FCC License or PUC Authorization specified on the schedule or (ii) materially or adversely affect any rights of the Borrower or any of its Subsidiaries thereunder; the Borrower has no reason to believe that the FCC Licenses and PUC authorizations on the schedule which it wishes to renew will not be renewed in the ordinary course; and the Borrower and its Subsidiaries have sufficient time, materials, equipment, contract rights and other required resources to complete, in a timely fashion and in full, construction of any Paging System or PCS System in compliance with all applicable technical standards and construction requirement deadlines. The current oumership and operation by each of the Borrower and its Subsidiaries of its Mobile Communications Business complies with the Communications Act of 19SL as amended and all Rules, Regulations and Policies of the FCC, any PUC and of any other Governmental Authority, except for such non-compliance that could not result in a Material Adverse Effect.” Amended Complaint at ¶ 63 (emphasis in Amended Complaint) (quoting Secondary Offering Prospectus). Plaintiffs allege, at the time MobileMedia entered into the Credit Agreement and covenanted to comply with all FCC licenses and applicable laws, MobileMedia had filed, and continued to file, false Forms 489. See Amended Complaint at ¶ 64. Plaintiffs contend, therefore, MobileMedia was in default on its Credit Agreement at the moment of execution. See id. 7. Alleged False and Misleading Risk Disclosures The Secondary Offering Registration Statement and Prospectus Contained a section entitled “RISK FACTORS.” See Secondary Offering Registration Statement and Prospectus at 9-11. Plaintiffs allege the factors delineated in this section were materially false and misleading because the statements “failed to disclose that, at that very moment, [MobileMedia] was actually experiencing these purported ‘risks’ which were already negatively impacting MobileMedia’s business and operations and future prospects.” Amended Complaint at ¶ 65. For example, the Secondary Offering Prospectus stated: “[MobileMedia] has pursued and intends to continue to pursue acquisitions of wireless communications businesses as a component of its growth strategy. No assurance can be given that suitable acquisition candidates can be identified, purchased and financed on acceptable terms, or that future acquisitions, if completed, will be successful. The success of any completed acquisition will depend on [MobileMedia’s] ability to integrate effectively the acquired business into the company. The process of integrating acquired wireless telecommunications businesses may involve unforeseen difficulties and may require a disproportionate amount of management attention and company resources.” Amended Complaint at ¶ 66(a) (quoting Secondary Offering Prospectus at 9). Plaintiffs contend these statements are materially false and misleading because Mo-bileMedia was warning of possible difficulties integrating acquired businesses at a time when MobileMedia was allegedly experiencing those very same difficulties. See Amended Complaint at ¶ 66(b). Plaintiffs allege any difficulties associated with integrating new acquisitions were highly probable considering the problems that were being experienced with the Dial Page integration. See id. According to Plaintiffs, Defendants had no reason to suggest future acquisitions might entail “unforeseen” difficulties. See id. The Risk Factors also addressed possible concerns related to the FCC. The Secondary Offering Prospectus stated: “[MobileMedia] and the wireless communications industry are subject to regulation by the FCC and various state regulatory agencies. There can be no assurance that either the FCC of those state agencies having jurisdiction over [MobileMedia’s] business will not adopt regulations or take actions which would adversely affect the business of the company.” Amended Complaint at ¶ 67 (emphasis in Amended Complaint) (quoting Secondary Offering Prospectus at 10). Plaintiffs allege any disclosure of the filing of false Forms 489 would have created a virtual certainty the FCC would take action, such as refusing to renew license applications, that would have a material adverse impact on MobileMedia. See id. Plaintiffs also contend warnings concerning the customer base of MobileMedia were misleading. The Risk Factors stated: ■ “The result of operations of wireless communications service providers such as [Mo-bileMedia] are significantly affected by subscriber disconnections. In order to realize net growth in units in service, disconnected subscribers must be replaced and additional subscribers must be added. The sales and marketing costs associated with attracting new subscribers are substantial relative to the costs of providing service to existing subscribers. The Company’s average monthly unit disconnect rate (“churn rate”) during the nine months ended September 30, 1995 and the year ended 1994 were approximately 2.4% and 2.3%, respectively, of its subscriber base for each period. Although [MobileMedia’s] churn rate is below the industry average, there can be no assurance that [MobileMe-dia] will not experience an increase in its churn rate which may adversely affect [MobileMedia’s] results of operations.” Amended Complaint at ¶ 68 (quoting Secondary Offering Prospectus at 11). Plaintiffs allege MobileMedia was experiencing increased churn rates, at the time the Prospectus became effective, as a result of problems associated with the integration of Dial Page. See Amended Complaint at ¶ 68. Plaintiffs contend the warning is misleading because it does not disclose MobileMedia was experiencing the difficulty warned of at the time the statement was made. See id. 8. Alleged False Statements Made in Connection with 1995 Fourth Quarter Results On approximately 22 February 1996, Mobi-leMedia released its fourth quarter results for 1995. See Amended Complaint at ¶ 75(a). In connection with this release, Rorke stated “1995 was certainly a banner year for Mobile,” and he “looked forward to continued growth and increasing levels of service and product offerings in 1996.” See id. Plaintiffs allege the statement of Rorke was materially misleading “because, far from being a ‘banner year,’ 1995 was a year in which MobileMedia had begun to dramatically expand its... practice of filing false Forms 489 with the FCC.” See Amended Complaint at ¶ 75(b). Plaintiffs argue the increasing number of false filings increased the likelihood of discovery by the FCC. See id. Plaintiffs further argue discovery by the FCC would cause the FCC to revoke the existing licenses of MobileMedia and refuse to grant it new ones. See id. Therefore, Plaintiffs allege statements regarding “continued growth” and “increasing levels of service and product offerings in 1996” were made without a reasonable basis. See id. 9. Alleged False and Misleading 1995 Form 10-K On 29 March 1996, MobileMedia filed its Form 10-K (the “1995 Form 10-K”) for the fiscal year ending 31 December 1995 with the SEC. See Amended Complaint at ¶ 77. The 1995 Form 10-K was signed by Rorke and Kealey. See id. The 1995 Form 10-K repeated statements concerning the ability of the FCC to revoke an existing license or deny an application for a new license. See Amended Complaint at ¶ 77. Plaintiffs allege MobileMedia again falsely stated it was “ ‘unaware of any circumstances which would prevent the grant of pending or future renewal applications.’” See id. (quoting 1995 Form 10-K). Plaintiffs also allege MobileMedia falsely portrayed the MobileComm acquisition. See Amended Complaint at ¶ 81. The 1995 Form 10-K stated: The Company believes the MobileComm acquisition has solidified and will continue to enhance its competitive position due to increased scale, wider sales coverage, greater spectrum capacity and penetration of a broader range of distribution channels, particularly retail sales to individual customers. See id. Plaintiffs claim this statement was misleading because it failed to disclose integration problems that were being experienced at the time. See id. Plaintiffs further claim the 1995 Form 10-K was materially false and misleading because it created the impression the acquisition of MobileComm was causing an increase in subscribers. See id. Plaintiffs allege at the time the 1995 Form 10-K was filed Mobi-leMedia was facing an increased churn rate. See id. The 1995 Form 10-K did include cautionary language stating “ ‘[t]he success of the resulting combined business will depend on management’s ability to integrate effectively [MobileMedia’s] and MobileComm’s business.” See Amended Complaint at ¶81. Plaintiffs allege this disclaimer is boilerplate and did not disclose problems being experienced at the time of the statement. See id. In addition, the 1995 Form 10-K made reference to and attached the Credit Agreement. See Amended Complaint at ¶ 78. Plaintiffs allege references to the Credit Agreement in the 1995 Form 10-K were materially false and misleading for the same reasons references to the Credit Agreement in the Secondary Offering Registration Statement were false and misleading. See id. at ¶ 79-80. 10. Alleged False and Misleading Press Releases On 13 May 1996, MobileMedia issued a public statement concerning, among other things, financial results for the first quarter ending 31 March 1996 (the “13 May 1996 Press Release”). See Amended Complaint at ¶ 83. Rorke and Kealey were quoted as stating: “ ‘Our first quarter was an excellent and exciting time,’ Rorke, MobileMedia Chief Executive Officer, stated. ‘We cleared regulatory hurdles in our acquisition of MobileComm more than two months ahead of schedule, which saved $16.3 million off the purchase price and allowed us to start the integration process sooner than we expected. Thanks to the dedication of all our employees we are fast becoming one dynamic, nationwide company.’ “ ‘The integration of MobileComm is ahead of schedule.’ Kealey, MobileMedia’s president and chief operating officer, added. ‘The speed of the integration will impact short-term results due to the acceleration of expenses, but we believe that the consolidation of operations (customer service, billing, credit and collections, and inventory distribution) will position the company for long-term success. Our integration strategy, first with Dial Page and now with MobileComm, continues to build on the MobileMedia consolidated nationwide platform.’ ” Id. (quoting 13 May 1996 Press Release). Plaintiffs allege the 13 May 1996 Press Release was materially false and misleading because Rorke and Kealey failed to disclose certain information. See Amended Complaint at ¶ 84. This information is alleged to have been known to, or recklessly disregarded by, Rorke and Kealey. See id. In particular, Plaintiffs allege Rorke and Kealey omitted information concerning the integration problems MobileMedia was experiencing at the time of the statement and the filing of false Forms 489 with the FCC. See id. On 6 June 1996, MobileMedia issued a press release concerning the integration of MobileComm and Dial Page (the “6 June 1996 Press Release”). See Amended Complaint at ¶ 86. In the 6 June 1996 Press release, Rorke stated: “The integration of MobileComm is ahead of schedule.... While the speed of the integration will impact short-term results due to increased expenses, these investments in the integration to rationalize network capacity and consolidate operations (customer service, billing and management information systems, and inventory management and order fulfillment, among other functions) will position [MobileMedia] for long-term success. Our integration strategy, first with Dial Page and now with MobileComm continues to build on our consolidated nationwide platform.” See id. (quoting 6 June 1996 Press Release). Plaintiffs allege references to “unspecified integration costs” and to the integration of MobileComm, in the 6 June 1996 Press Release, did not accurately reflect the situation of MobileMedia. See Amended Complaint at ¶ 86. According to Plaintiffs, the consolidation of Dial Page and MobileComm had come to represent a “functional disaster” by June 1996. See id. at ¶ 87 On 15 July 1996, MobileMedia announced several management changes (the 15 July 1996 Press Release). See Amended Complaint at ¶ 90. Bayer was quoted as stating: “The Board and I believe strongly in Mo-bileMedia’s prospects and the wireless messaging industry in general. We will ensure that we continue to provide our customers with the best and most reliable service. In that regard, we will continue to pursue [MobileMedia’s] strategy of strengthening and extending its market leadership and competitive position. We will do this by accommodating our growing subscriber base through our broad base of spectrum resources; expanding sales coverage to new geographic regions and increasing distribution channel penetration; developing strategic marketing alliances to access new distribution channels and demographic groups; and building critical mass to establish competitively advantageous economies of scale.” Id. (emphasis in original) (quoting 15 July 1996 Press Release). Plaintiffs contend the statement Mobi-leMedia would “continue” to provide “reliable service” was materially false and misleading. See Amended Complaint at ¶ 92. Plaintiffs allege at the time of the 15 July 1996 Press Release, Bayer was aware the company was not providing reliable service to its customers. See id. Plaintiffs further allege Bayer knew the internal problems MobileMedia was experiencing would prevent reliable service from being offered. See id. On 25 July 1996, MobileMedia announced financial results for the second quarter ended 30 June 1996 (the “25 July 1996 Press Release”). See Amended Complaint at ¶ 93. MobileMedia announced a net loss for this quarter. See id. In addition, Bayer stated: “The wireless messaging industry continues to grow at a strong pace, and Mobi-leMedia continues to capture a large share of that growth. In addition, we continue to make good progress in working through the challenges involved with integrating our acquisition of MobileComm, and expect to have the integration completed within our planned 18-month time frame.” Id. (emphasis in Amended Complaint) (quoting 25 July 1996 Press Release.) Plaintiffs allege instead of making good progress integrating MobileComm, Mobi-leMedia was experiencing serious problems. See Amended Complaint at ¶ 94. Plaintiffs further allege Bayer knew of these problems or recklessly disregarded them. See id. 11. The Alleged Corrective Statement On 27 September 1996, the last day of the Class Period, MobileMedia issued a press release. See Amended Complaint at ¶ 103. The 27 September 1996 Press Release stated: “[MobileMedia] ... said that it has discovered certain errors in the licensing process for a number of its local transmission one-way paging stations. [MobileMedia] has appointed outside counsel to conduct an independent investigation into the licensing errors. [MobileMedia] also has commenced discussions with the [FCC] regarding the errors and will deliver the report of its investigation to the FCC upon completion. [MobileMedia] cannot be cer tain what action the FCC may take in regard to this matter, but such actions could have a material adverse effect upon the financial condition or operations of [MobileMedia].” See id. (quoting 27 September 1996 Press Release). Plaintiffs allege this announcement directly contradicted previous statements of MobileMedia concerning its business, management, integration process and compliance with FCC rules and Regulations. See id. Also in the 27 September 1996 Press Release, MobileMedia declared third quarter 1996 results would be affected by the acquisition of MobileComm. See Amended Complaint at ¶ 105. The 27 September 1996 Press Release stated: “MobileMedia... today estimated that, due to continuing costs and increased subscriber chum associated with the integration of the operations of MobileComm, earnings before interest, taxes, depreciation and amortization for the third quarter ending September 30,1996 are expected to be approximately $35 million. “The Company noted that third quarter results would, absent waivers or certain other events, place the company in violation of certain covenants in [the Credit Agreement].” [MobileMedia] is working with its banks as well as its financial advis-ors on measures to address these issues. “ ‘Third quarter earnings have been significantly impacted by the effects of the integration of the operations of MobileComm, the largest ever in the paging industry, which doubled the size of the company. As [MobileMedia] has previously stated, we expect to carry additional costs throughout the integration period, which is expected to be completed by the end of the second quarter of 1997. In addition, the difficulties associated mth the integration of two sizeable companies have caused subscriber chum to increase from that reported for the first half of1996.’ ” Amended Complaint at ¶ 105 (emphasis in Amended Complaint) (quoting 27 September 1996 Press Release). Plaintiffs allege the market reaction to the 27 September 1996 Press Release caused MobileMedia stock to fall approximately 31% from $6.50 per share to $4.50 per share. See Amended Complaint at ¶ 106. On 30 September 1996 the value of MobileMedia stock fell another 8% to $4.125 per share. The value of MobileMedia stock continued to fall aftér additional information concerning MobileMedia and its financial status were released. See Amended Complaint at ¶¶ 108-113. On 2 December 1996 the market price for MobileMedia stock was $1 per share. See Amended Complaint at ¶ 113. Discussion A. Standard For Dismissal Under Rule ■ 12(b)(6) and 15 U.S.C. § 78w-U(b)(3) A court may dismiss a complaint pursuant to Rule 12(b)(6) for failure to state a claim where it appears beyond doubt that no relief could be granted under any set of facts which could be proved consistent with the allegations. See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 811, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Weiner v. Quaker Oats Co., 129 F.3d 310, 315 (3d Cir.1997); Unger v. National Residents Matching Program, 928 F.2d 1392, 1395 (3d Cir.1991); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990); Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir.1988). Because granting a motion under Rule 12(b)(6) can result in a dismissal at an early stage of a case, all allegations of a plaintiff must be taken as true and all reasonable factual inferences drawn in his or her favor. See Gomez v. Toledo, 446 U.S. 635, 636, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980); Weiner, 129 F.3d at 315; In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir.1997); Piecknick v. Pennsylvania, 36 F.3d 1250, 1255 (3d Cir.1994); Jordan v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994); Shapiro v. UJB Fin. Corp., 964 F.2d 272, 279-80 (3d Cir.), cert. denied, 506 U.S. 934, 113 S.Ct. 365, 121 L.Ed.2d 278 (1992); Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir.1991); Unger, 928 F.2d at 1395; Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990); Melikian v. Corradetti, 791 F.2d 274, 277 (3d Cir.1986). A complaint should not be dismissed unless it appears beyond doubt that “the facts alleged in the complaint, even if true, fail to support the .claim.” Ransom, 848 F.2d at 401; see also Shapiro, 964 F.2d at 279-80. Legal conclusions made in the guise of factual allegations, however, are given no presumption of truthfulness. See Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir.1997) (“[A] court need not credit a complaint’s ‘bald assertions’ or ‘legal conclusions’ when deciding a motion to dismiss”); Haase v. Webster, 807 F.2d 208, 215 (D.C.Cir.1986), vacated on other grounds, 835 F.2d 902 (D.C.Cir.1987); Briscoe v. LaHue, 663 F.2d 713, 723 (7th Cir.1981), aff'd, 460 U.S. 325, 103 S.Ct. 1108, 75 L.Ed.2d 96 (1983); Western Mining Council v. Watt, 643 F.2d 618, 626 (9th Cir.), cert. denied, 454 U.S. 1031, 102 S.Ct. 567, 70 L.Ed.2d 474 (1981); Bermingham v. Sony Corp. of Am., 820 F.Supp. 834, 846 (D.N.J.1992), aff'd, 37 F.3d 1485 (3d Cir.1994). A district court reviewing the sufficiency of a complaint has a limited role. “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support his [or her] claims.” Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1420; Bermingham, 820 F.Supp. at 846. Generally, when conducting such an inquiry, a district court generally may not consider any material beyond the pleadings. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426; Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993), cert. denied, 510 U.S. 1042, 114 S.Ct. 687, 126 L.Ed.2d 655 (1994); Wallace v. Systems & Computer Tech. Corp., No. 95-6303, 1997 WL 602808, at *5 (E.D.Pa. Sept.23, 1997); Gannon v. Continental Ins. Co., 920 F.Supp. 566, 574 (D.N.J.1996). A district court, however, may properly refer to the factual allegations contained in other documents, such as documents referred to in the complaint and matters of public record if the claims of the plaintiff are based upon those documents. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426; In Re Westinghouse Sec. Litig., 90 F.3d 696, 707 (3d Cir.1996); In re Donald Trump Casino Sec. Lit., 7 F.3d 357, 368 n. 9 (3d Cir.1993), cert. denied, 510 U.S. 1178, 114 S.Ct. 1219, 127 L.Ed.2d 565 (1994); Pension Benefit Guar. Corp., 998 F.2d at 1196; Wallace, 1997 WL 602808, at *5; Weiner, 928 F.Supp. at 1380; Gannon, 920 F.Supp. at 574. In other words, such documents must be “integral to or explicitly relied upon in the complaint.” In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426 (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir.1996)). The reason for this rule is to prevent: [t]he situation in which a plaintiff is able to maintain a claim of fraud by extracting an isolated statement from a document and placing it in the complaint, even though if the statement were examined in the full context of the document, it would be clear that the statement was not fraudulent. In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426. Under these circumstances, reference to documents outside of the complaint does not convert a motion to dismiss into a motion for summary judgment. See In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426; Pension Benefit Guar. Corp., 998 F.2d at 1196-97. B. The Securities Act and Exchange Act In general, the Securities Act regulates the initial distribution of securities, see Gustafson v. Alloyd Co., 513 U.S. 561, 571-72, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995) (citations omitted), and the Exchange Act regulates post-distribution trading. See Cen tral Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 171, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994) (citing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 752, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975)). Together with the Securities Act, the Exchange Act “embrace[s] a fundamental purpose ... to substitute a philosophy of full disclosure for the philosophy of caveat emptor.” See id. (quoting Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 151, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972)) (internal quotation marks omitted). The Securities Act and the Exchange Act create a detailed scheme of civil liability. See Central Bank of Denver, 511 U.S. at 171. The SEC is able to commence an administrative action and an injunctive proceeding to enforce statutory prohibitions. See id. Private plaintiffs are also empowered to commence litigation under the express private rights of action contained in both the Securities Act and the Exchange Act. See id. 1. Sections 11 and 12(a)(2) of the Securities Act Count One alleges a violation of Section 11. See Amended Complaint at ¶¶ 117-128. Pursuant to Section 11 certain enumerated persons may be liable for material misstatements and omissions found in any portion of a registration statement. See Section 11. To state a claim under Section 11, a plaintiff must allege: 1) The plaintiffs purchased securities traceable to an effective registration statement; 2) The defendants fall within the statutorily enumerated categories; and 3) the registration statement, at the time it became effective, contained a material misstatement or omission. See Herman & MacLean v. Huddleston, 459 U.S. 375, 381-82, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983); In re Trump, 7 F.3d at 365 n. 2, 368 n. 10; Section 11. A plaintiff need not plead fraud, reliance, motive, intent, knowledge or scienter under Section 11. See Herman & MacLean, 459 U.S. at 381-82, 103 S.Ct. 683; Ernst & Ernst v. Hochfelder, 425 U.S. 185, 200, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); In re Donald J. Trump Sec. Litig., 7 F.3d 357, 368 n. 10 (3d Cir.1993). Count Two alleges a claim pursuant to Section 12(a)(2). See Amended Complaint at ¶¶ 129-37. Pursuant to Section 12 any person who offers or sells a security may be held liable for material misstatements or omissions found in a prospectus. To state a claim under Section 12(a)(2) a plaintiff must allege 1) [d]efendants offered or sold a security; 2) [b]y the use of any means of communication in interstate commerce; 3) [t]hrough a prospectus or oral communication; 4) [b]y making a false or misleading statement of a material fact or by omitting to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading; 5) [pjlaintiff did not know of the untruth or omission; and 6) [defendants knew, or in the exercise of reasonable care, could have known of the untruth or omission. Ballay v. Legg Mason Wood Walker, Inc., 925 F.2d 682, 687-88 (3d Cir.1991). Similar to Section 11, a plaintiff need not plead fraud, reliance or scienter on the part of the defendants to succeed under Section 12(a)(2). See Trump, 7 F.3d at 368 n. 10. a. The Integration Allegations Section 11 and Section 12(a)(2) claims must allege material misrepresentations or omissions based upon the facts as they existed at the time of the offering. See Trump, 7 F.3d at 368. Defendants argue the integration problems, as alleged by the Secondary Offering Plaintiffs, were not known at the time the Secondary Offering Registration Statement and Prospectus became effective. See Moving Brief at 8-12. Defendants further argue the misrepresentation allegations concerning integration problems are based solely upon events which occurred after the Secondary Offering. See id. at 8. Defendants contend such allegations are insufficient as a matter of law. See id. The Secondary Offering Plaintiffs allege the following information was known to Mo-bileMedia at the time the Secondary Offering Registration Statement and Prospectus became effective: • “Technical Problems. The Company was experiencing significant and substantial problems assimilating and absorbing Dial Page’s subscriber base. In addition, the Company was incurring increasing costs associated with the integration of units-in-service between paging networks which was necessary to balance out capacity and prevent network overcrowding;” • “Billing Problems. The Company was experiencing significant and substantial problems in smoothly assimilating Dial Page customers into its billing system and, accordingly, was in some cases not billing customers or incorrectly billing customers;” • “Chum rate. The Company was experiencing a higher rate of churn — customers disconnecting their pagers — than it anticipated prior to the Dial Page acquisition. This increase in churn rate was directly related to the Company’s problems successfully integrating the subscriber base of Dial Page into its technical base and billing system. Thus, as customers experienced problems with either the technical operation of their pager or billing for its use, they opted to disconnect it.... ” • “Personnel. The Company was incurring increasing costs as it was forced to hire additional personnel to focus on the integration of Dial Page. In addition, the Company was not, through the Dial Page acquisition, effectively eliminating dupli-cative costs as was intended and publicly represented. Moreover ... the turnover in personnel and organizational changes following the Dial Page acquisition caused MobileMedia’s procedures for tracking license authorizations to collapse. ..” • “Compliance unth FCC Rules and Regulations ... [T]he number of false Forms 489 filed with the FCC, while already . substantial, began to increase in the Fall of 1995 as MobileMedia encountered significant difficulty integrating the license authorizations related to the Dial Page acquisition into its database tracking system .... [B]y the Fall of 1995, the Company’s internal system for tracking authorizations and construction status had collapsed. Moreover, defendants had been informed that MobileComm also had significant FCC compliance problems ...” Amended Complaint at ¶ 57. In addition, The Secondary Offering Plaintiffs allege the following statement, included in the “Risk Factors” portion of the Secondary Offering Registration Statement, was materially false or misleading at the time it was made: The success of any completed acquisition will depend on the Company’s ability to integrate effectively the acquired businesses into the Company. The process of integrating acquired wireless communications businesses may involve unforeseen difficulties and may require a disproportionate amount of management attention and Company resources. Amended Complaint at ¶ 66(a) (emphasis in Amended Complaint). The Secondary Offering Plaintiffs assert the above statements were materially misleading because MobileMedia omitted material facts concerning problems with the integration of Dial Page. Specifically, as of the date of the Secondary offering, the Secondary Offering Plaintiffs allege MobileMedia was aware of technical problems in assimilating and absorbing Dial Page’s subscriber base, billing problems arising from the assimilation of Dial Page customers, an increased churn rate, and increased personnel expenses. See Amended Complaint at ¶¶ 57, 66. Defendants first argue these allegations are conclusory and unsupported and should be dismissed. See Moving Brief at 11. As mentioned, “a court need not credit a complaint’s ‘bald assertions or legal conclusions’ when deciding a motion to dismiss.” In re Burlington Coat Factory, 114 F.3d at 1429. In the instant matter, the Secondary Offering Plaintiffs have provided more than mere assertions and legal conclusions to support their claims. For example, the 15 October 1996 Report, read in a light most favorable to the Secondary Offering Plaintiffs, supports the allegations that integration problems existed as of the Secondary Offering. See 15 October 1996 Report at 10 (noting problems integrating Dial Page negatively impacted regulatory compliance tracking as early as September 1995); id. at 11 (noting Mobi-leMedia was having managerial problems and transition difficulties in early 1995). These allegations of the Amended Complaint are sufficient to support the inference statements of MobileMedia were false or misleading at the time of the Secondary Offering. Defendants next argue the facts supporting the allegations of the Secondary Offering Plaintiffs are all based upon hindsight. See Moving Brief at 12. Defendants argue claims based solely upon hindsight are inac-tionable. See id. “Fraud by hindsight” has been defined as the “attempt to impose liability on management for unrealized economic predictions.” See Sinay v. Lamson & Sessions Co., 948 F.2d 1037, 1040 (6th Cir.1991); Zucker v. Quasha, 891 F.Supp. 1010, 1014 (D.N.J.), aff'd 82 F.3d 408 (3d Cir.1996). To be actionable, a statement or omission must be misleading at the time it was made. See Zucker, 891 F.Supp. at 1014. Liability cannot be imposed on the basis of subsequent events. See id. at 1016-17 (filing for bankruptcy four months after offering, could not be used to support claim corporation was in a precarious financial position at the time of the offering). In the instant matter, the Secondary Offering Plaintiffs do not seek to infer the existence of integration problems at the time of the Secondary Offering from later occurrences. Rather, the Secondary Offering Plaintiffs allege, independent of later events, the integration problems existed at the time the Secondary Offering was made. As previously stated, the Anended Complaint alleges MobileMedia, at the time of the Secondary Offering, was experiencing technical problems, billing problems, an increased churn rate, increased personnel expenses, and problems complying with FCC rules and regulations. See Amended Complaint at ¶ 57. As noted above, the Amended Complaint, supported by the 15 October 1996 Report, further alleges these problems existed as of the date of the Secondary Offering. See Amended Complaint at ¶¶ 56-57, 65; 15 October 1996 Report at 10-11. . Unlike Zucker, where the plaintiffs sought to imply financial troubles from the later filing of a bankruptcy petition, Secondary Offering Plaintiffs do not seek to imply integration problems at the time of the Secondary Offering from later events or disclosures. Accordingly, the Amended Complaint sufficiently alleges the Secondary Offering Registration Statement and Prospectus were misleading at the time they were made and are not fraud by hindsight. Defendants next argue even if the allegations of the Secondary Offering Plaintiffs are not “fraud by hindsight,” the integration problems represent instances of corporate mismanagement. See Moving Brief at 13-14 n. 5. The Supreme Court held acts constituting no more than internal corporate mismanagement were not actionable under the Federal securities laws. See Santa Fe Indus. v. Green, 430 U.S. 462, 479, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1977) (holding instances of corporate mismanagement are inaction-able in the context of Section 10(b)); In re Craftmatic Sec. Litig., 890 F.2d 628, 637-40 (3d Cir.1989) (applying Santa Fe to claims brought under Section 11 and Section 12(a)(2)). “Although allegations of failure to disclose mismanagement alone do not state a claim under the federal securities law, a claim that defendants failed to disclose material facts may be actionable.” In re Craftmatic, 890 F.2d at 639; see also Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1098 n. 7, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991) (once statements are made there is an obligation not to mislead). The line between the nondisclosure of material information and the nondisclosure of mismanagement is often difficult to discern. See In re Craftmatic, 890 F.2d at 639. Allegations of material omissions may ser