When a publicly traded company makes false or misleading statements about its business, the company's securities will often trade at prices higher than they're actually worth. In other words, the securities will trade at prices artificially inflated by the false or misleading information. Once the truth that was concealed by the company is revealed to the public, the stock price will then drop, causing investors to suffer damages. This scenario depicts a common type of securities fraud. When instances of securities fraud are discovered, it could form the basis of a securities class action lawsuit. A securities class action lawsuit is brought by a large group of investors known as a class, who join together to assert claims against a company arising out of the company's fraudulent behavior.
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