Full opinion text
OPINION & ORDER BAER, District Judge. I. INTRODUCTION Plaintiffs allege that defendants sold them Vivendi Universal, S.A. (“Vivendi”) common stock or American Depository Shares (“ADSs”) at artificially inflated prices as a result of defendants’ material misrepresentations and omissions between October 30, 2000 and August 14, 2002, inclusive, (the “class period”) in violation of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “1934 Act”). Furthermore, plaintiffs allege that defendants induced them to purchase or otherwise acquire Vivendi common stock or ADSs (the “merger subclass”) pursuant to a registration statement and prospectus dated October 30, 2000 (the “registration statement”), which was issued in connection with the three-way merger of Vivendi, Seagram Company Limited (“Seagram”) and Canal Plus, S.A. (“Canal Plus”) on December 8, 2000 (the “merger”), in violation of §§ 11, 12(a)(2) and 15 of the Securities Act of 1933 (the “1933 Act”). In addition, plaintiffs allege that they were damaged as a result of the merger (the “proxy subclass”) between Vivendi, Seagram, and Canal Plus, in violation of § 14(a) of the 1934 Act and SEC Rule 14a~9 promulgated thereunder. Compl. ¶¶ 1, 29, 40. Defendants in this securities class action move to dismiss the Consolidated Class Action Complaint (the “complaint”) pursuant to 15 U.S.C. § 78u-4 (1995), and Rules 8, 9(b), 12(b)(1), 12(b)(6) and 41(b) of the Federal Rules of Civil Procedure. For the reasons stated below, defendants’ motion is denied in part and granted in part. II. STANDARDS OF REVIEW When construing a motion to dismiss under the Private Securities Litigation Reform Act (the “PSLRA”), 15 U.S.C. § 78u-4, the Court must determine if plaintiffs pled with particularity sufficient facts “to support a reasonable belief as to the misleading nature of the statement or omission.” In re Initial Public Offering Sec. Litig., 241 F.Supp.2d 281, 330 (S.D.N.Y.2003) (quotation marks and citations omitted); see Novak v. Kasaks, 216 F.3d 300, 313-14 (2d Cir.2000); 15 U.S.C. § 78u-4(b)(1). Moreover, the Court must determine if plaintiffs “state[d] with particularity facts giving rise to a strong inference that ... defendants] acted with the required state of mind.” In re IPO, 241 F.Supp.2d at 330; see 15 U.S.C. § 78u-4(b)(2). Under Rule 8, the complaint merely needs to “afford [the] defendant sufficient notice of the communications complained of to enable him to defend himself.” Kelly v. Schmidberger, 806 F.2d 44, 46 (2d Cir.1986) (quotation marks and citations omitted). Furthermore, the complaint must “be so construed as to do substantial justice.” Fed.R.Civ.P. 8(f). The facts alleged must be “simple, concise, and direct.” Fed.R.Civ.P. 8(e)(1). Rule 9(b) adds to the pleading standard of Rule 8, but does not drastically alter it. See In re IPO, 241 F.Supp.2d at 326 (noting that Rules 8’s and 9’s “pleading requirements only differ in degree, not in kind”). When fraud is alleged, plaintiffs must allege facts with particularity. Particularity “means the who, what, when, where, and how: the first paragraph of any newspaper story.” Id. at 327 (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990)). Defendants’ motions to dismiss under Rule 12(b)(1) challenges this Court’s statutory or constitutional power to adjudicate the case. Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). When considering a Rule 12(b)(1) motion, the Court construes the complaint broadly and liberally in conformity with the principle set out in Rule 8(f), “but argumentative inferences favorable to the pleader will not be drawn.” 5A Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure 1350, at 218-219 (1990 & Supp. 1991). The movant and the pleader may use affidavits and other materials beyond the pleadings themselves in support of, or in opposition to, a challenge to subject matter jurisdiction. See Land v. Dollar, 330 U.S. 731, 735 n. 4, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947); Exchange Nat’l Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126, 1130 (2d Cir.1976), cert. denied sub. nom., 469 U.S. 884, 105 S.Ct. 253, 83 L.Ed.2d 190 (1984). Once challenged, the burden of establishing subject matter jurisdiction rests on the party asserting jurisdiction. See Thomson v. Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 86 L.Ed. 951 (1942). Unlike a motion to dismiss under Rule 12(b)(6), however, a dismissal under Rule 12(b)(1) is not based on the claim’s merits. See Exchange Nat’l Bank, 544 F.2d at 1130-1131. When considering a motion to dismiss pursuant to Rule 12(b)(6), the Court is required to accept as true all of the facts alleged in the complaint and draw all reasonable inferences in the plaintiffs’ favor. See Krimstock v. Kelly, 306 F.3d 40, 47-48 (2d Cir.2002). A motion to dismiss should be granted only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton College, 128 F.3d 59, 63 (2d Cir.1997) (citations and internal quotations omitted). It is improper, however, “ ‘to assume that the [plaintiffs] can prove facts that it has not alleged.’ ” Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir.2001) (citing Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983)). The Court has broad discretion to dismiss a complaint under Rule 41(b). See Joseph Muller Corp. Zurich v. Societe Anonyme De Gerance Et D’Armement, 508 F.2d 814, 815 (2d Cir.1974). “No one standard or single factor controls a court’s determination under Rule 41(b); each case must be examined in its own factual circumstances.” S.E.C. v. Everest Mgmt. Corp., 466 F.Supp. 167, 171 (S.D.N.Y.1979) (citing Michelsen v. Moore-McCormack Lines, Inc., 429 F.2d 394, 395 (2d Cir.1970)). “In reaching its conclusion, a court may balance the strong public policy in favor of deciding cases on the merits with the burden on the administration of justice and prejudice to the defendant caused by the delay.” Id. With these standards in mind, I review defendants’ motions to dismiss. III. FACTUAL ALLEGATIONS Vivendi is a global conglomerate comprised primarily of two major divisions: “Media and Communications” and “Environmental Services.” Compl. ¶ 30. Beginning in June 1996, Vivendi began an acquisition spree, with Messier, Vivendi’s Chief Executive Officer (“CEO”) and Chairman until July 3, 2002, and Hannezo, Vivendi’s Chief Financial Officer (“CFO”) until July 9, 2002, at the helm. This growth strategy resulted in the accumulation of a sizeable debt. After Vivendi acquired Seagram for $36 billion and Canal Plus for $12 billion, Vivendi purchased substantial equity positions in a host of other companies, including Houghton Mifflin Co., Studio Canal and USA Network Entertainment, using Vivendi stock or by borrowing against future earnings. Id. ¶¶ 52-53. Pursuant to this growth strategy, plaintiffs allege that “it was crucial for defendants to continue to report favorable financial results in order to keep Vivendi’s stock price high and to maintain its favorable credit ratings and access to additional debt financing.” Id. ¶ 53. Plaintiffs allege that throughout Messier’s and Hannezo’s terms at Vivendi, Vi-vendi and the individual defendants issued public statements indicating that Vivendi’s financial results were “better than expected.” For example, in a March 9, 2001 and a March 12, 2001 press release, Vivendi reported that its fiscal year 2000 results had exceeded expectations. Id. ¶ 58-59. In an April 23, 2001 press release, Vivendi stated that its first quarter 2001 results were “very strong” and that its Media and Communications revenues and Telecoms revenues were up. Id. ¶ 61. At a shareholders’ meeting held the following day, Messier stated that according to Hanne-zo’s calculations, Vivendi had a “healthy balance sheet” and a “pro forma net debt that [was] practically non-existent.” Id. ¶ 62. On July 2, 2001 Vivendi filed a Form 20-F for fiscal year 2000, which Hannezo signed and which contained consolidated financial statements for 1998, 1999, and 2000. Id. ¶ 66. Subsequently, Messier stated in a press release that Vivendi’s earnings before interest, taxes, depreciation, and amortization (“EBITDA”) had the “highest growth rate[ ] of the industry ... [and that its] stock is definitely an attractive investment today.” Id. ¶ 67-68. Because of such statements, Vivendi’s common stock and ADSs increased in price by 5%, id. ¶ 70, and securities analysts gave Vivendi high credit ratings, id. ¶ 71. Plaintiffs further allege that in response to market rumors that Vivendi’s earnings would be disappointing, defendants “categorically denied any problems.” Id. ¶ 73. For example, in a September 25, 2001 press release, Messier maintained that “[d]espite the current environment, [Viven-di would] reach all [of its] previously stated revenue/EBITDA objectives for the 2001 year.” See id. ¶ 74. In an October 30, 2001 press release, Messier proclaimed the strength of Vivendi’s reported revenue and EBITDA growth as a testament to Vivendi’s resilience during a tough economy and that he expected 10% revenue growth and 35% EBITDA growth in 2001. Id. ¶ 75. Once again, securities analysts responded positively to defendants’ statements. Id. ¶ 77. During a press conference in connection with Vivendi’s $10.3 billion acquisition of USA Networks Entertainment and the creation of Vivendi Universal Entertainment (“VUE”), Messier indicated that the acquisition would not put “pressure” on Vivendi but would allow it to increase its EBITDA, net income and net free cash flow. Id. ¶ 81. Moreover, Messier emphasized that despite its global debt ratio, “the balance sheet [was] clean.” Id. Furthermore, as reported by AFX News Limited on February 6, 2002, Messier distributed a company letter noting that “[s]ome global markets, including the music market, declined during this period. But despite the difficulties, we are the only media company not to have issued a profit warning on its operating results and there’s no change to that situation ... [and that] there are no hidden risks.” See id. ¶ 83. In a March 5, 2002 press release, Messier stated that Media and Communications, operating free cash flow was “up 2 billion euros” and that defendants “stay fully committed to conveying full transparency in [their] financial results.” See id. ¶ 89. In response to Moody’s issuance of a debt rating one notch above “junk” status, Vivendi issued a press release to mitigate the impact of the rating by claiming that it “ha[d] no impact on Vivendi Universal’s cash situation.” Id. ¶ 100. As a consequence of the press release, plaintiffs assert that defendants were able to “limit the decline in the price of Vivendi’s common stock and ADSs.” Id. On May 28, 2002, Vivendi filed its Form 20-F signed by Hannezo for the 2001 fiscal year. In response to declines in common stock and ADS prices, defendants issued a press release in May 2002 stating that Vivendi “ha[d] no reason to anticipate or fear any further deterioration in its credit rating” and that the “cash situation ... [was] comfortable.” Id. ¶ 103. By June 26, 2002, after a series of negative market rumors, Messier tried to reassure investors in a conference call by claiming that “there [was] no hidden liability.” Id. ¶ 105. In addition on July 2, 2002, Bloomberg reported that Messier sent an e-mail to his employees reiterating that, despite Viven-di’s debt being downgraded again and reports that Vivendi was in danger of default, “there [were] no hidden risks in the company’s accounting.” Id. ¶ 109. On July 3, 2002, Messier resigned and Viven-di, through new management, issued a press release acknowledging that it indeed had a short-term liquidity crisis. Id. ¶¶ 109-10. Later, the Associated Press reported on August 14, 2002 that Jean-Rene Fourtou (“Fourtou”), Vivendi’s new CEO, admitted that Vivendi “ ‘was [then] facing a liquidity problem.’ ” Id. ¶ 114. In addition, plaintiffs allege that during the class period, Vivendi filed financial statements with the SEC that “were materially false and misleading because the financial statements materially inflated and distorted [Vivendi’s] true financial performance during the [c]lass [p]eriod.” Id. ¶ 122. More specifically, Vivendi allegedly failed to timely record goodwill impairments, id. ¶ 124, and Vivendi improperly applied generally accepted accounting principles (“GAAP”) in regard to its acquisition of U.S. Filter, Seagram and Canal Plus. Id. ¶ 128. In regard to Canal Plus, plaintiffs allege that Vivendi valued Canal Plus at Q12.5 billion, but reported Q12.6 billion as goodwill. Id. ¶ 129. By June 2002, under French GAAP, Vivendi had written off approximately 78% of that Q12.5 billion acquisition cost, but did not take any write-off for impaired goodwill under U.S. GAAP in 2000 or 2001. Id. ¶¶ 130-31. “[B]y refusing to take any goodwill impairment write-offs under U.S. GAAP [on its 2002 Form 20-F, Vivendi] effectively represented to investors that the cashflows Vivendi expected to receive from the assets it acquired prior to and during the [e]lass [p]e-riod equaled or exceeded the carrying value of such assets,” id. ¶ 132 (emphasis in original), though this allegedly was not in fact the situation, see id. ¶¶ 133-38 (referencing the complaint filed by Canal Plus in March 2002 alleging that NDS Group PLC’s permitted the “proliferation of counterfeit smart cards that enabled users to circumvent the security measures built into the Canal [Plus’s] conditional access system” and resulted in Canal Plus losing over a billion dollars). After Messier and Hannezo left Vivendi, Vivendi recorded an additional Q3.8 billion goodwill impairment for Canal Plus in the second quarter of 2002, even though Canal Plus reported revenue growth of 8%-providing “further evidence that the impairment recorded in [Canal Plus’s goodwill] ... should have been taken earlier.” Id. ¶ 141. In regard to the U.S. Filter acquisition, plaintiffs allege that Vivendi recorded approximately Q4.6 billion in goodwill when U.S. Filter’s operating results were much less than reported by Vivendi. See id. ¶¶ 169-77. Because companies similar to U.S. Filter were sold during the class period for less than that paid by Vivendi, plaintiffs contend that defendants knew or recklessly ignored that U.S. Filter’s reported goodwill was materially inflated, id. ¶¶ 146-47. Plaintiffs also allege that defendants materially misrepresented Vivendi’s financial statements by improperly consolidating the revenues from Cegetel and Maroc Telecom when it held less than a 50% ownership interest in those companies in 1999, 2000 and 2001. See id. ¶¶ 148-56. Specifically, plaintiffs allege that Vivendi’s “consolidation of Cegetel’s 1999-2001 operating results were false and misleading because Vivendi only owned 44% of Cege-tel shares and it did not have a sufficient controlling financial interest in Cegetel.” Id. ¶¶ 158-61. Consequently, “Vivendi’s reported revenues were overstated by Q3.9 billion, Q5.1 billion and Q6.4 billion for the years ended 1999, 2000 and 2001, respectively.” Id. ¶ 162. Similarly, plaintiffs allege that Vivendi’s consolidation of Maroc Telecom’s 2001 financial results in its 2001 Form 20-F was false and misleading because it only owned 35% of Maroc Telecom. Cegetel’s and Maroc Telecom’s improper consolidation is purportedly evidenced by Fourtou’s statements during a June 26, 2002 conference call that Vivendi, at that time, did “not have access to [cash flow from] Cegetel and Maroc Telecom,” and an August 14, 2002 conference call, during which Fourtou revealed that “ ‘Vi-vendi [could not] access the cash flow generated by the companies it owns less than 50 percent of.’ ” Id. ¶ 167. Vivendi’s reported revenues were thus overstated by Q1.4 billion in 2001 for Maroc Telecom. Id. ¶ 168. Vivendi’s financial results were allegedly further distorted due to its purported improper recognition of revenue from its U.S. Filter subsidiary. Id. ¶¶ 169-72. In particular, “Vivendi ... [prematurely] recognized anticipated revenue from multi-year public service contracts upon signing on the contracts” in violation of GAAP and its own publicly disclosed revenue recognition policy. Id. ¶ 173; see also id. ¶¶ 174-80. Plaintiffs additionally allege that Messier’s stock buy-back program-where he clandestinely bought Vivendi stock on the market (approximately 10% of Vivendi’s equity) in 2001-“caused [Vivendi] to spend approximately $6.3 billion, ” id. ¶ 183(b) (emphasis in original), thus adding even greater burden to Vivendi’s already massive debt. Defendants allegedly did not initially disclose this information and later made inadequate disclosures in regards to Vivendi’s sale of put options in 2000 and 2001, which obligated Vivendi to purchase approximately 2% of all of its outstanding stock at an average price of Q69, when the actual share price should have been well below this. Id. ¶ 183(c). Plaintiffs cite numerous newspaper reports that examined the severity of Vivendi’s liquidity crisis. See id. ¶¶ 184-88. Notably, an October 31, 2002 Wall Street Journal article reported that on December 13, 2001, Hannezo wrote to Messier stating: “I’ve got the unpleasant feeling of being in a car whose driver is accelerating in the turns and that I’m in the death seat.... All I ask is that all of this not end in shame.” Id. ¶ 184. That article also reported that Messier touted the stability of Vivendi’s debt-and-liquidity predicament despite being advised to the contrary by Vivendi’s investment bank, Goldman Sachs & Co. (“Goldman Sachs”). Id. ¶ 186. At a French parliamentary hearing in September 2002, Fonrton admitted that had Messier remained CEO of Vivendi beyond July 3, 2003, Vivendi would invariably have gone bankrupt “within 10 days.” Id. Moreover, on December 13, 2002, the Associated Press reported that “Hannezo admitted that 2001 was marked by a series of errors, including underestimating the debt problem.” Id. ¶ 188. IV. DISCUSSION A. Subject Matter Jurisdiction Over Claims Brought by Foreign Plaintiffs Defendants assert that this Court lacks jurisdiction over the claims brought by foreign class members who acquired Vivendi ordinary shares traded on the foreign market. Under the “conduct test,” which the Second Circuit has adopted to determine when extraterritorial application of the federal securities laws is warranted, this Court has subject matter jurisdiction over the claims of foreign investors abroad (1) “if the defendant’s conduct in the United States was more than merely preparatory to the fraud, and particular acts or culpable failures to act within the United States directly caused losses to foreign investors abroad.” Alfadda v. Fenn, 935 F.2d 475, 478 (2d Cir.1991). Defendants contend that the principal activities complained about by investors abroad were not directly caused by activities in the United States. Itoba Ltd. v. Lep Group PLC, 54 F.3d 118, 122 (2d Cir.1995). More specifically, defendants note that Vivendi is a French corporation that is not registered to do business in the United States. Further, defendants note that Vivendi does not make quarterly filings as is required of American corporations by the SEC and had only one corporate officer located in the United States until September 2001, when the individual defendants moved here. Thus, defendants claim that the alleged conduct at issue, namely the creation and dissemination of allegedly fraudulent statements and financial data, was initiated, organized and approved by Vivendi corporate executives in France. Further, defendants assert that Vivendi’s filing of the Forms 20-F and 6-K with the SEC and other disseminated materials to shareholders in the United States cannot confer jurisdiction upon the claims of foreign purchasers, and that Vivendi’s vast domestic presence by virtue of its numerous acquisitions in the United States is irrelevant to evaluating the subject matter jurisdiction over the claims of investors who bought their shares in foreign markets. Plaintiffs have alleged that Vivendi undertook a scheme to acquire numerous well-known U.S. entertainment and publishing companies, such as Universal Studios, Houghton Mifflin and USA Networks, Compl. ¶23, and that to successfully accomplish this plan, it took on a $21 billion debt while fraudulently assuring all investors through false and misleading reports filed with the SEC and news releases that it had sufficient cash-flow to manage its debts, id. ¶¶ 24, 54-192. Further, plaintiffs allege that two of the alleged principal actors in this scheme, Messier, Vivendi’s former CEO, and Hannezo, Vivendi’s former CFO, spent half of their time in the United States from September 2001 through the end of the relevant class period of August 31, 2002, specifically to increase investments by United States investors in Vivendi. Id. ¶¶ 69, 77, 90-92, 105. Contrary to defendants’ characterization, their conduct can hardly be deemed merely preparatory within the United States. Given Messier’s and Hannezo’s decision to move to the United States, allegedly to better direct corporate operations and more effectively promote misleading perceptions on Wall Street, which harbors some of the most watched securities exchanges in the world, one can reasonably infer that the alleged fraud on the American exchange was a “substantial’ or ‘significant contributing cause’ of [foreign investor’s] deeision[s] to purchase [Vivendi’s] stock” abroad. Itoba Ltd., 54 F.3d at 122. See, e.g., Compl. ¶¶ 21-25 (summarizing pervasiveness and coextensiveness of fraud in the United States and abroad to sustain Vi-vendi stock price and the use of instru-mentalities of interstate commerce to promulgate the alleged fraud). Defendants’ motion to dismiss claims brought by foreign plaintiffs for lack of subject matter jurisdiction is denied. Europe and Overseas Commodity Traders, S.A. v. Banque Paribas London, 147 F.3d 118, 130-31 (2d Cir.1998) (finding “jurisdiction over a predominantly foreign securities transaction ... when, in addition to communications with or meetings in the United States, there has also been a transaction on a U.S. exchange, economic activity in the U.S., harm to a U.S. party, or activity by a U.S. person or entity meriting redress.”); S.E.C. v. Princeton Economic Intern., Ltd., 84 F.Supp.2d 452, 454 (S.D.N.Y.2000) (assuming subject matter jurisdiction for conduct that was “more than merely preparatory” and was “a substantial or significant contributing cause to the losses”); In re Gaming Lottery, 58 F.Supp.2d 62, 73 (S.D.N.Y.1999) (same); Leonard v. Garantia Banking Ltd., 1999 WL 944802, at *4-6 (S.D.N.Y. Oct. 19, 1999) (“[T]his Court finds that the trading of ADRs on the NYSE satisfies the conduct test, and any ‘tipping of the scales’ which might be required by [Europe and Overseas Commodity Traders, S.A] is present in the use of United States banks and wire-transfer systems.”). B. Compliance with Rule 8 Defendants contend that the complaint must be dismissed in its entirety under Rule 8 of the Federal Rules of Civil Procedure because it is an improper “puzzle pleading.” In particular, defendants note that plaintiffs broadly allege that the Form F-4 that defendants filed with the SEC misstates the financial condition of Vivendi, but fails to specifically identify the pages containing the false statements in the 700-page document. Further, defendants note that plaintiffs have identified 38 separate statements that are said to be false, but do not identify with particularity what part of the document or quoted paragraph is false. Defendants contention, brought under Rule 8, in reality, seems to be nothing more than a claim under Rule 9(b). The degree of particularity that defendants seek-down to the precise sentence-simply is not mandated by the minimal pleading requirements of Rule 8. The complaint alleges that the Form F-4, signed by the individual defendants and filed by Vivendi, was misleading and improper because Vivendi presented false historical financial statements for fiscal year 1999 and the first half of fiscal year 2000. Compl. ¶ 54, 55. More specifically, the complaint alleges that Vivendi improperly consolidated into its financials, revenue from its Cegetel subsidiary, failed to timely write-down impaired goodwill from previous corporate investments and acquisitions, including U.S. Filter, and overstated the Company’s revenue from its environmental division on certain multiyear contracts in violation of GAAP. Id. Further, plaintiffs pled facts in detail to support the reasons that the enumerated categories of statements are allegedly false and misleading. See id. ¶¶ 119-80. These allegations suffice under the liberal pleading standard of Rule 8 to withstand a motion to dismiss. C. Exemption from § 14(a) of the 1934 Act Section 14(a) prohibits any person from soliciting any shareholder proxy or consent or authorization in violation of SEC rules and regulations. 15 U.S.C. § 78n(a). Plaintiffs contend that the proxy statement included with the registration statement issued by Vivendi was materially false and misleading, and suggest that the falsity of the proxy statement should suffice to impose liability under § 14(a) of the 1934 Act. Rule 240.3a12-b(b), however, exempts “foreign private issuers” from liability under § 14(a). Batchelder v. Kawamoto, 147 F.3d 915, 923 (9th Cir.1998). Vivendi, undisputedly, is a corporation organized under French law, and it is therefore a “foreign issuer” under Rule 240.3b-4(b). 17 C.F.R. § 240.3b-4(b). Plaintiffs cite no authority or factual allegations that shows Vivendi fits within any exception to the definition of “foreign issuer.” See id. § 240.3b-4(c). Further, plaintiffs fail to present any authority to support its position that liability may be imputed to Vivendi for Seagram’s alleged misstatements in Seagram’s proxy statements. Because Vivendi is a foreign private issuer, plaintiffs’ § 14(a) claim against Vivendi must be dismissed. D. Section 11 and 12(a)(2) Claims Under the 1933 Act Plaintiffs allege in counts I and II that Vivendi violated §§ 11 and 12(a)(2) of the 1933 Act when it submitted a registration statement and prospectus, filed on Form F-4 (“F-4”), dated October 30, 2000, in connection with the merger of Vivendi, Seagram and Canal Plus. Compl. ¶¶ 54-55, 198-215. To state a claim under § 11 of the 1933 Act, plaintiffs need only allege that a registration statement “contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein not misleading.” 15 U.S.C. § 77k(a); Herman & MacLean v. Huddleston, 459 U.S. 375, 381, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983). Section 12(a)(2) of the 1933 Act attaches liability to “[a]ny person who ... offers or sells a security ... by the use of any means or instruments ... in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading.” 15 U.S.C. § 77Z(a)(2). For the following three reasons, defendants’ challenges to plaintiffs’ claims on these counts must fail. 1. Named Plaintiffs Purportedly Lack Standing Vivendi claims that none of the named plaintiffs received Vivendi shares pursuant to the allegedly fraudulent October 30, 2000 registration statement, ie. Form F-4, but rather they obtained their shares pursuant to Form F-6, which plaintiffs do not allege to be false. According to plaintiffs, they purchased ‘Vivendi [American Depositary Shares] in exchange for Seagram stock as set forth in the [F-4] registration statement.” Pl. Br. at 25-26. As background, an American Depository Share (“ADS”) represents an ownership interest in a foreign deposited security, much like a share of stock represents an ownership interest in a corporation, that has been deposited with a depository, such as a United States bank or trust company. SEC, American Depository Receipts, 1991 WL 294145, at *2 (S.E.C. May 23, 1991). An American Depository Receipt (“ADR”) is a physical certificate, akin to a stock certifícate, that evidences ownership in one or multiple fractions of an ADS. Id. Although the SEC formally differentiates between ADSs and ADRs, participants in the ADR market generally consider the terms to be synonymous, and use the terms interchangeably. Id.; Definition (visited 8/20/03) <http://www.adr.com/ research/about _def.html>. For convenience, the term ADS will be used to refer to either ADSs or ADRs here. ADSs may be traded in the United States in much the same way as equity securities issued by domestic companies. Id. at *5. Under the 1933 Act, ADSs and the underlying foreign deposited securities are “considered separate securities, each subject to the registration requirements unless an exemption is available.” Id. at *10. Thus, when a foreign issuer seeks to make a public offering in the United States of securities in the form of ADSs, both the ADSs and the foreign deposited securities generally must be registered. Id. “In 1983, the [SEC] adopted Form F-6 specifically for the registration of ADSs under the Securities Act.” Id.; see also American Depository Receipts, 48 Fed.Reg. 12346-02 (1983) (codified at 17 C.F.R. pts. 200, 230, 239, 240, and 249); 17 C.F.R. § 239.36. Form F-4 registers the foreign deposited securities. See 17 C.F.R. § 239.34; see also American Depositary Receipts, 1991 WL 294145, at *10 n. 47. Here, Vivendi filed a Form F-4, in connection with the merger of Seagram, Vivendi, and Canal Plus into Vivendi Universal. The Form F-4 registered approximately 461 million ordinary shares, ie., foreign deposited securities, of Vi-vendi Universal, “represented by an equal number of Vivendi Universal ADSs.” PI. Exh. 2. Plaintiffs contend that Form F-6 “merely filed the Deposit Agreement with The Bank of New York, (which sets forth the terms by which the ADS is represented by ordinary shares or may be exchanged for ordinary shares),” and that Vivendi’s argument rests on the faulty premise that Form F-6 “registered” the ADSs that the plaintiffs acquired. I disagree. Plaintiffs cite no authority to support its position that a foreign issuer may register its ADSs with Form F-4, and indeed, such argument appears to run afoul of the SEC’s rules, which specifically established the Form F-6 to register ADSs. See American Depository Receipts, 48 Fed.Reg. 12346-02 (1983) (codified at 17 C.F.R. pts. 200, 230, 239, 240, and 249); 17 C.F.R. § 239.36. Consistent with the SEC’s rules, Form F-4 filed by Vivendi states that [t]his registration statement relates to the Vivendi Universal ordinary shares.... A separate registration statement on Form F-6 will be filed in connection with the Vivendi Universal American Depository Shares. Pl. Exh. 2 (emphasis added). A claim under § 11 may be maintained only by those who specifically received their shares pursuant to the defective registration statement pleaded in the complaint. Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 786 (2d Cir.1951) (Section 11 claim “may be maintained only by one who comes within a narrow class of persons ie. those who purchase securities that are the direct subject of the prospectus and registration statement.”) (emphasis added); Euro Trade & Forfaiting, Inc. v. Vowell, 2002 WL 500672, at *11 (S.D.N.Y. Mar. 29, 2002); see also Lee v. Ernst & Young, LLP, 294 F.3d 969, 976-77 (8th Cir.2002) (holding that a cause of action exists under §11 “so long as the security was indeed issued under that registration statement”) (emphasis in original); Joseph v. Q.T. Wiles, 223 F.3d 1155, 1159 (10th Cir.2000) (“[t]he buyer must have purchased a security issued under the registration statement at issue, rather than some other registration statement.”). To the extent that plaintiffs bought Vivendi’s ordinary-shares pursuant to the allegedly defective Form F-4, see Compl. ¶¶ 1, 202, 213, 219, 222, they have standing to bring their § 11 and § 12(a)(2) claims. See 15 U.S.C. §§ 77k(a), 77l(a)(2). Further, plaintiffs who acquired their Vivendi ordinary shares after the merger between Vivendi, Seagram and Canal Plus may also have standing under § 11 provided the shares are traceable to the allegedly defective Form F-4. See DeMaria v. Andersen, 318 F.3d 170, 178 (2d Cir.2003). Because plaintiffs do not allege defects in the F-6 form, however, and thus, purchasers who bought ADSs pursuant to the F-6 form cannot claim to have standing under § 11 or § 12(a)(2) as to those shares, id., their §§ 11 and 12(a)(2) claims based on the purchase of ADSs are barred. 2. Pleading Under § 11 And § 12(a)(2) Are Too Vague To Be Cognizable Defendants contend that plaintiffs’ allegations that Vivendi’s financial statements and balance sheets in the F-4 were false and misleading are insufficient because they do not indicate what statements were false, why they were false or to what extent they were false. Defendants cite to a handful of cases that are inapposite because they all relate to the pleading requirement for violations of § 10(b) and Rule 10b-5 under the 1934 Act, which must satisfy the higher pleading standard of Rule 9(b) and the PSLRA. See, e.g., Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 115 (2d Cir.1982); Weinstein v. Appelbaum, 193 F.Supp.2d 774, 778-79 (S.D.N.Y.2002); In re Health Mgm’t Systems, Inc. Sec. Litig., 1998 WL 283286, at *2 (S.D.N.Y. June 1, 1998). The allegations deemed inadequate by defendants relate to the 1933 Act, which courts have long held does not have a heightened pleading requirement. See, e.g., In re IPO, 241 F.Supp.2d 281, 337-42 (S.D.N.Y.2003); In re In-Store Adver. Sec. Litig., 878 F.Supp. 645, 650 (S.D.N.Y.1995); Nelson v. Paramount Communications, Inc., 872 F.Supp. 1242, 1246 (S.D.N.Y.1994); In re College Bound Consol. Litig., 1994 WL 172408, at *3 (S.D.N.Y. May 4, 1994); In re AnnTaylor Stores Sec. Litig., 807 F.Supp. 990, 1003 (S.D.N.Y.1992). Because a “suit under § 11 [and § 12(a)(2) ] of the 1933 Act requires no proof of fraud or deceit,” Fischman v. Raytheon Mfg. Co., 188 F.2d at 786, the claims must merely meet the basic pleading standard in Rule 8(a). In re IPO, 241 F.Supp.2d at 338-39; In re BankAmerica Corp. Sec. Litig., 78 F.Supp.2d 976, 987 (E.D.Mo.1999). The allegations that Vivendi improperly consolidated investments and reported inflated (and therefore misrepresented) revenues in the October 2000 registration statement and prospectus satisfy the requirements of Rule 8(a) to plead claims under §§ 11 and 12(a)(2). See Compl. ¶¶ 54, 148-180, 208-215. 3. Defects In Form F-4 Fail To Support Claims Under §§ 11 Or 12(a)(2) a. Plaintiffs’ 1933 Act Claims Are Time Barred Defendants contend that plaintiffs’ 1933 Act claims rest on an alleged “key clause” in the Cegetel shareholder agreement that was described in Vivendi’s 2000 Form 20-F, filed July 2, 2001. In defendants’ opinion, plaintiffs were on inquiry notice at least from July 2, 2001, and the one-year statute of limitations should start to run from that date. Plaintiffs, however, did not file their complaint until July 18, 2002. Further, defendants contend that once plaintiffs were allegedly on inquiry notice that the Form 20-F contained one misstatement or omission, they should be considered on inquiry notice for all claims based on that prospectus, and that any such claim is now time-barred. “[C]laims under Sections 11, 12, and 15 of the ’33 Act are governed by the statute of limitations contained in Section 13 of the ’33 Act.” Dodds v. Cigna Sec., Inc., 12 F.3d 346, 349 (2d Cir.1993) (citing 15 U.S.C. § 77m (1988)). “Broadly speaking, the statutory periods for claims under either ... [the 1933 Act or the 1934 Act] begin to run when the claim accrued or upon discovery of the facts constituting the alleged fraud. Discovery, however, includes constructive and inquiry notice as well as actual notice.” Id. at 350. The statute of limitations may be triggered “when, after obtaining inquiry notice ..., the [plaintiffs], in the exercise of reasonable diligence, should have discovered the facts underlying the alleged fraud.” Rothman v. Gregor, 220 F.3d 81, 96 (2d Cir.2000) (emphasis in original). “To trigger the underlying duty to inquire ... defendants] must establish that plaintiff[s] acquired information that suggested the probability and not mere possibility that fraud had occurred.” Lenz v. Associated Inns and Restaurants Co. of America, 833 F.Supp. 362, 371 (S.D.N.Y.1993) (citing Armstrong v. McAlpin, 699 F.2d 79, 88 (2d Cir.1983) (emphasis in original)). The key clause that defendants reference, see Compl. ¶ 158, indicates that Vi-vendi’s ability to access Cegetel assets could be blocked if three other minority shareholders dissented (BT, Mannesmann and Transtel). Although the key clause indicates an exception to Vivendi’s authority to acquire material amounts of Cegetel’s assets, it reveals nothing about whether Vivendi lacked the authority to consolidate Cegetel’s revenue. Rather, according to the Form 20-F, Vivendi held the right to consolidate Cegetel’s revenues by virtue of a shareholder agreement, which gave Vi-vendi a majority of the shareholder voting rights. Compl. ¶¶ 157-159. Plaintiffs allege that it was not until a 2002 conference call with investors that Jean-Rene Four-tou finally revealed to the public that the agreement gave Vivendi only limited control over Cegetel, and thus Vivendi could not actually consolidate Cegetel’s cash flow. Id. ¶ 160. Defendants cite to nothing else, other than the somewhat uninformative clause in the Form 20-F, that would suggest plaintiffs should have been on constructive or actual notice that Viven-di did not wield the authority to access Cegetel’s revenue. I find inadequate basis to conclude at this time that plaintiffs were on inquiry notice of their §§ 11 or 12(a)(2) claims on and after July 2, 2001, the release date of the Form 20-F. Defendants’ motion to dismiss plaintiffs’ claims under § 11 and § 12(a)(2) as time-barred is denied. b. Vivendi’s Lack of Actual Knowledge Vivendi notes that plaintiffs assert that the Form F-4 was false and misleading because Vivendi had “failed to timely write down impaired goodwill from previous corporate investments and acquisitions, including U.S. Filter.” Vivendi Mem. at 10; Compl. ¶ 55. Vivendi contends that all of the facts relied upon by plaintiffs to establish this allegation postdate the Form F-4 filing, and thus, Viven-di argues that plaintiffs cannot establish that Vivendi knew it had overstated its reported goodwill in violation of § 11 and § 12(a)(2). Vivendi’s argument is without merit. Actual knowledge is not an element of either § 11 or § 12 claims. As explained by the United States Supreme Court: [Section] 11 of the 1933 Act unambiguously creates a private action for damages when a registration statement includes untrue statements of material facts or fails to state material facts necessary to make the statements therein not misleading. Within the limits specified by § 11(e) [, which do not apply here], the issuer of the securities is held absolutely liable for any damages resulting from such misstatement or omission. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 207-08, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976); see Herman & MacLean v. Huddleston, 459 U.S. 375, 382, 103 S.Ct. 683, 74 L.Ed.2d 548 (1983) (“Liability against the issuer of a security is virtually absolute, even for innocent misstatements.”); In re IPO, 241 F.Supp.2d at 396. Similarly) “[w]ith respect to ... § 12(2) claim[s] ... there need be no showing of knowing misrepresentation or reckless disregard of the truth. Section 12(2) imposes strict liability, subject to the reasonable-care defense. The resulting standard is one of negligence.” Columbia Sav. and Loan Ass’n v. American Intern., 1994 WL 114828, at *4 (S.D.N.Y. Mar. 31, 1994) (quoting Odette v. Shearson, Hammill & Co., 394 F.Supp. 946, 956 (S.D.N.Y.1975)). Despite Vivendi’s purported lack of knowledge prior to preparing the Form F-4, it may nonetheless be held absolutely liable for damages resulting from the misstatements therein. The fact that plaintiff relies on evidence that post-date the Form F-4 does not vitiate the false or misleading nature of the registration statement. Defendants’ motion to dismiss the § 11 and § 12(a)(2) claims, for failure to allege facts showing Vivendi knew of the allegedly false and misleading statements at or before the time they were made, is denied. E. Claims Under § 10(b) and Rule 10b-5 In count V, plaintiffs allege that the earnings reported by Vivendi during the class period were false, in violation of § 10(b) and Rule 10b-5. To state a cause of action under § 10(b) and Rule 10b-5, plaintiffs must allege that “defendants], in connection with the purchase or sale of securities, made a materially false statement or omitted a material fact, with scienter, and that plaintiffs’] reliance on defendants’] action caused injury to the plaintiffs].” Lawrence v. Cohn, 325 F.3d 141, 147 (2d Cir.2003) (quoting Ganino, 228 F.3d at 161). Section 10(b) claims sound in fraud, and must satisfy the pleading requirements of Rule 9(b) and the PSLRA. See In re Scholastic Corp. Sec. Litig., 252 F.3d 63, 69-70 (2d Cir.2001). 1. Timely Recordation Of Goodwill Impairment Defendants contend that plaintiffs “have failed to plead any facts that would support an inference that Vivendi should have determined prior to January 2002” that a recorded impairment under Statements of Financial Accounting Standards (“SFAS”) No. 121 should have been made. Vivendi Mem. at 13. According to Vivendi, impairment needs to be reported only when “the sum of the undiscounted future cash flows estimated to be generated from the use and ultimate disposal of the assets [is] less than the net carrying value of those assets.” Id. Plaintiffs contend that they have alleged numerous facts in the complaint to demonstrate that the cash flow from Canal Plus was impaired and should have been reported before the end of 2001. Namely, Canal Plus had filed a lawsuit in 1999 against another company for the piracy of its technology in the United States, allegedly giving rise to damages in excess of $1 billion. Compl. ¶¶ 134-36. In addition, Vivendi’s new management, after Messier and Hannezo resigned, recorded an additional Q3.8 billion impairment for Canal Plus, at the end of the first half of 2002, when under French GAAP, Canal Plus revenue grew by 8%. Id. ¶ 141. Plaintiffs allege that the additional impairments, in view of the revenue growth and lack of explanation from Vivendi for the added impairments, evidence the fact that Canal Plus’s impairment should have been recorded earlier. Id. Furthermore, plaintiffs note that Vivendi prepared a memo shortly after it acquired Canal Plus, detailing that marketing rights to soccer contracts at Canal Plus were not bona fide assets, as originally believed, because they belonged to the football league, and thus they should be written off in Vivendi’s year-end statement for the 2000 fiscal year. Id. ¶¶ 142-145. Vivendi failed, however, to write off that contract as a mistaken asset in its year-end financial statement. Id. ¶ 145. As to U.S. Filter, the complaint alleges that its reported goodwill was inflated, as evidenced by, among other things: (1) U.S. Filter’s actual operating results were much less than reported because Vivendi improperly recognized revenue from U.S. Filter, contrary to U.S. GAAP rules, id. ¶¶ 146, 169-177, see also infra Part IV.E(3), and (2) companies comparable to U.S. Filter that sold during the class period held price-to-earning ratios that were much lower in comparison to the U.S. Filter shares purchased by Vivendi, id. ¶ 146. In addition, Vivendi’s new management, after Messier and Hannezo resigned, reported an additional goodwill impairment of Q7.2 billion on a French GAAP basis for other entities. Id. ¶ 147. In contrast, in the prior quarter, while under former management, Vivendi reported no charge for goodwill impairment. Plaintiffs construe the sizable reported goodwill impairments in the subsequent quarter as an indication that the goodwill impairments recorded by the prior management during the class period was clearly insufficient. Id. I find that the facts alleged, which I must presume to be true, support a reasonable belief that the undis-counted future cash flows of Canal Plus, U.S. Filter and other entities, were less than the carrying value of those assets, see, e.g., Compl. ¶¶ 134-36, 141, 145-47, 169-77, and hence their impairments of goodwill should have been reported, but were not. In view of the large impairments taken immediately after the departure of key figures in Vivendi’s management, a reasonable inference can be drawn that Vivendi had reasonable grounds to believe the impairments had to be reported and that former management concluded not to do so. See Novak, 216 F.3d at 314 n. 1. 2. Improper Consolidation Of Maroc Telecom And Cegetel Revenues Plaintiffs claim that Vivendi had improperly consolidated the financial revenues of Maroc Telecom and Cegetel into its own financial results, Compl. ¶¶ 148-168, and that Vivendi’s reported revenues were overstated by an aggregate of Q3.9 billion, Q5.1 billion and Q7.8 billion for 1999, 2000 and 2001, respectively. Id. ¶¶ 162, 168. Vivendi contends that it controlled a majority of the shareholder voting rights in Cegetel and Maroc Telecom. Thus, according to Vivendi, it held “exclusive control” over Cegetel and Maroc Telecom under Article L.233-16 of the French Code de commerce, and it “was therefore required to consolidate pursuant to paragraph 1000 of the Appendix to Regulation 99-02 of the French Comité de la Réglementation Comptable (“CRC”).” See Slifkin Decl. Exh. 8. Although Vivendi may have had the ability to control a majority of the voting rights, the CEO of Vivendi, Jean-Rene Fourtou, admitted that it did not own a majority of the shares of either Cegetel or Maroc, and that it could not access the cash flow from those companies, despite the shareholder voting agreement. Compl. ¶¶ 160, 167. Paragraph 101 of the CRC provides that “[a] company under control or significant influence shall be excluded from consolidation if: ... severe and long-lasting restrictions substantially call into question ... the possibilities of transfers of financial resources between said company and the other companies included in the scope of consolidation.” Slifkin Decl. Exh. 8 (emphasis added). In view of the exclusion provision of paragraph 101 under the CRC, I disagree with Vivendi that its inability to access the cash flow of Cegetel and Maroc Telecom is inconsequential when it comes to consolidated earnings. Contrary to Vivendi’s claim, it would appear, given Fourtou’s admission that certain restrictions prevented Vivendi from accessing Cegetel’s and Maroc Tele-com’s cash flow, that under French GAAP, the restrictions arguably place the companies outside the scope of the mandatory consolidation. Defendants further argue that reconciliation with U.S. GAAP requires that the parent company consolidate enterprises in which it has a controlling financial interest, as represented by a majority voting interest. Vivendi Mem. at 17 (citing SFAS No. 94 ¶ 13 (Slifkin Deck Exh. 9)). Vivendi notes that the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (“FASB”) also states that the minority shareholders’ ability to block “dispositions of assets greater than 20% of the fair value of the investee’s total assets” does not overcome the presumption of consolidation by the majority holder of the shareholder voting interest. See Slifkin Decl. Exh. 10 at 4. Whether the rights of a minority shareholder may overcome the presumption of consolidation by the shareholder with a majority voting interest in a company is fact specific, id. at 3, and must be decided on a case-by-case basis from the totality of the circumstances. As further noted by the EITF, the rights granted the minority shareholders “may be so restrictive [on the majority shareholders] as to call into question whether control rests with the majority owner.” Id. at 1. The facts and circumstances that may rebut the presumption of consolidation “should be based on whether the minority rights, individually or in the aggregate, provide for the minority shareholder to effectively participate in significant decisions that would be expected to be made in the ‘ordinary course of business.’ ” Id. at 3 (emphasis added). If a minority shareholder holds “substantive participating rights,” then the presumption that the majority shareholder should consolidate the investee’s balance sheets is rebutted. Id. at 4. In regards to earnings of a corporation jointly held by majority and minority shareholders, “[t]he rights of the minority shareholder relating to dividends or other distributions may be protective, or participating and should be assessed in light of the available facts and circumstances.” Id. at 7, ¶ 3. A minority shareholder’s right to block customary or expected dividends or other distributions may represent an example of the minority shareholder’s substantive participating right. Id. Factors that should be weighed in this determination include: the relative ownership share of the minority shareholders, corporate governance arrangements, relationship between the majority and minority shareholders, and likelihood of the event or transaction that requires minority approval. Id. at 5-6. Thus far, Vivendi has not publicly disclosed the terms of the shareholders agreement. As noted above, Fourtou admitted that during the class period, Viven-di did not have access to either Cegetel’s or Maroc Telecom’s cash flows. Compl. ¶¶ 160, 167. Given the limited information available at this pre-discovery stage, and the fact-intensive inquiry required to resolve whether the minority interests in Cegetel and Maroc Telecom constitutes sufficient “substantive participating rights” to make consolidation improper under SFAS 94 and EITF 96-16, I am unconvinced that facts could not be proven to demonstrate that Vivendi’s consolidation of those companies’ revenues were improper under U.S. GAAP, which may give rise to liability under § 10(b) and Rule 10b-5. Drawing all reasonable inferences in favor of plaintiffs, the complaint alleges sufficient facts to show that Vivendi overstated its revenues, in reliance on revenue streams from companies that it had no right to tap. Lastly, defendants claim that even if consolidation of the subsidiaries were improper, it had no material effect on Vivendi’s net income and shareholder equity. Defendants ignore the fact that the reported Q17 billion in additional revenue impacted other material financial metrics that investors commonly rely on, such as revenue growth and EBITDA. These metrics demonstrate that the overstated revenue may constitute a misrepresented material fact that can support claims under § 10(b) and Rule 10b-5. Accordingly, Vivendi’s motion to dismiss these claims, on the basis that it properly consolidated Cegetel’s and Maroc Telecom’s revenue or that there have been no misrepresentations of material fact, is denied. 3. Improper Recognition Of Revenue From U.S. Filter Vivendi argues that plaintiffs do not plead sufficient facts to demonstrate the impropriety in its recognition of revenue from U.S. Filter. Accordingly, Vivendi contends that plaintiffs cannot rely upon the revenues recognized by Vivendi from U.S. Filter to demonstrate the falsity of Vivendi’s financial statements during the class period. Vivendi contends that such allegations are based on plaintiffs’ misunderstanding of “booking to backlog”-a practice that Vivendi asserts is an accepted practice of managerial record-keeping. Vivendi further asserts that plaintiffs’ allegation that the reported revenue from Vi-vendi’s Environmental Services division was overstated “by as much as 10 times” due to U.S. Filter’s improper accounting is mathematically impossible. Plaintiffs contend that Vivendi violated U.S. GAAP because it “recognized and reported the entire dollar amount of long-term, fixed priced contracts as revenue upon the signing of the contract,” resulting “in improperly recognized anticipated revenue from multi-year public service contracts” and yielding materially overstated operating results during the class period. Compl. ¶ 173-174. Although defendants disagree with plaintiffs’ characterization, defendants do not dispute this description of how Vivendi recognized revenue from U.S. Filter. Moreover, plaintiffs contend, and defendants do not dispute, that “U.S. GAAP provides that revenue should not be recognized until it is realized or realizable and earned.” Compl. ¶ 170 (citing FASB Concepts Statement No. 5, ¶ 83) (emphasis added). In addition, the SEC, FASB, and other accounting advisory sources advise that until services have been rendered, revenues for those services should not be recognized. Id. (citing SEC Staff Accounting Bulletin (“SAB”) No. 101 (The SEC staff “believes that up-front fees, even if non-refundable, are earned as the products and/or services are delivered and /or performed over the term of the arrangement or the expected period of performance.”)); FASB Concept Statement Nos. 2 and 5; Accounting Research Bulletin No. 43, Accounting Principles Board Opinion No. 10. The opinions expressed by the various accounting sources incorporated by reference in the complaint suffice to show that the revenues from U.S. Filter were recognized prematurely. Accordingly, I agree that plaintiffs have pled enough to provide a reasonable basis to infer that Vivendi indeed materially overstated its revenue, in part, through improperly recognizing revenue from U.S. Filter. 4. “Growing liquidity crisis” Vivendi contends that plaintiffs do not allege sufficient facts to show that it failed to disclose adequate evidence of its “growing liquidity crisis.” Vivendi asserts that it timely disclosed (1) its impairments to goodwill relating to its prior acquisitions and in accordance with French and U.S. GAAP; (2) its stock repurchase program in 2001 pursuant to French regulations; and (3) the put options sold in 2000 and 2001. Accordingly, Vivendi argues plaintiffs were aware or should have been aware of the purported liquidity crisis. Further, Vivendi asserts that plaintiffs’ allegations are insufficient to show that Vivendi was aware of the problem at the times it attested to its alleged financial health. I find the complaint adequately alleges facts from which I may infer that Vivendi had a liquidity problem, of which it was aware during the class period. For instance, the complaint notes that in December 6, 2001, Messier assured investors that ‘Vivendi Universal is in a very strong position, with solid performance in virtually every business.” Compl. ¶ 8. According to the complaint, Messier further announced that with the sales of Vivendi’s $1.5 billion interest in British Sky Broadcasting Pic and $1.06 billion interest in Vivendi Envi-ronnement, Vivendi would have “room to maneuver” for additional acquisitions. Id. Contrary to the rosy picture painted by Messier, Hannezo, a long time friend of Messier and Vivendi’s CFO, allegedly sent a desperate handwritten plea to Messier a week later, stating: “I’ve got the unpleasant feeling of being in a car whose driver is accelerating in the turns and that I’m in the death seat.... All I ask is that all of this not end in shame.” Id. ¶¶ 9, 184. According to an investigative report by the Wall Street Journal, entitled, “How Messier Kept Cash Crises at Vivendi Hidden; Media Giant Was At Risk Well Before Investors Knew,” Vivendi, unbeknownst to investors and Vivendi’s board, had “narrowly averted” a downgrade by credit-rating agencies in December 2001, which would have made it difficult to borrow money and would have “plunged the company into a cash crisis.” Id. In the wake of the narrowly averted downgrade, Hannezo sent his handwritten plea to Messier the same day and “implored [Messier] to take serious steps to reduce Vivendi’s ballooning debt.” Id. The following day, Messier, according to two directors who attended the board meeting, “made no mention of the close call with the rating agencies,” and reported that the “company had no problem.” Id. Accordingly, the board approved the $10 billion acquisition of USA Networks, unaware that “Vivendi was already in dire financial straits.” Id. The complaint further alleges that in the first half of 2002, defendants continued to deny that Vivendi had any liquidity problems. See id. ¶ 83 (assuring employees of Vivendi that “[t]here are no hidden risks” to warrant issue of a profit warning); ¶ 103 (stating that “the Company has no reason to anticipate or fear any further deterioration in its credit rating”); ¶ 106 (reporting to investors in June 2002 that “the company has no hidden, off-balance sheet liabilities,” and adding “We feel very confident looking to our debt and cash analysis with all our commitments of the group for the coming 12 months.”). On June 24, 2002, Goldman Sachs issued a report to Vivendi’s top executives and a handful of directors that indicated Vivendi could face bankruptcy as early as September or October of that year. Id. ¶ 186. Reportedly, a director who attended the meeting with Goldman Sachs advised Messier that he should resign, “as it was now clear Vivendi faced a severe cash crisis.” Id. In contrast to the grim prediction by Goldman Sachs, Messier reported to the Commission des Operations de Bourse (“COB”) two days later, on June 26, 2002, that ‘Vivendi Universal is confident of its capacity to meet its anticipated obligations over the next 12 months.” Id. Contrary to Messier’s representation to the public and public agencies, Jean-Rene Fourtou, Vi-vendi’s new CEO after Messier resigned in July 2002, stated that when he took over, “if Mr. Messier had stayed, the company would have gone bankrupt within 10 days.” Id. The December 2001 handwritten note, the report from Goldman Sachs and investigative reports from other news sources, provide sufficient basis to support a reasonable belief that Vivendi had an existing liquidity problem, of which defendants were aware, during 2001 and 2002. Defendants complaint that the numerous news articles reported after the end of the class period cannot establish the fact that Vivendi was aware of its liquidity problems at the time it made the statements at issue, and that plaintiffs seek to prove fraud by hindsight. The Second Circuit has explicitly recognized that plaintiffs may “rel[y] on post-class period data to confirm what a defendant should have known during the class period.” In re Scholastic Corp. Sec. Litig., 252 F.3d at 72 (citing Rothman, 220 F.3d at 92; Novak, 216 F.3d at 312-13). Defendants provide nothing to impugn the veracity of these post-dated news articles. To accept defendants’ reasoning, I should reward them for their successful concealment of their wrongdoing, which for the most part did not come to light until those in control of Vivendi resigned and lost the ability to further conceal the true extent of Viven-di’s financial woes. I decline to adopt defendants’ reasoning. Defendants further complaint that they disclosed sufficient information to allow investors to understand the extent of Vivendi’s liquidity problems and true financial condition. Vivendi’s purported “truth on the market” defense is “intensely fact-specific” and “rarely an appropriate basis for [dismissal].” Ganino v. Citizens Utilities Co., 228 F.3d 154, 167 (2d Cir.2000). The “truth on the market” defense requires defendants t