An investor purchases 10,000 shares at the $22 IPO price. The stock declines to $14 after it is revealed that the prospectus omitted a material pending lawsuit. Under Section 11, what is the maximum damages the investor can recover?

Why C — $80,000, but only if the decline is attributable to the omission and not to general market conditions

Under Section 11, damages are generally measured as the difference between the amount paid (not exceeding the offering price) and either the value at the time of suit, the sale price if sold before the suit, or the sale price if sold after filing but before judgment. The maximum damages would be $80,000 (10,000 shares x ($22 - $14)). However, defendants can reduce damages by proving that all or part of the decline was caused by factors other than the material misstatement or omission (the 'negative causation' defense). The investor does not need to prove reliance on the misstatement, only that they purchased in the offering.