Gustafson (defendant), McLean and Butler were the sole shareholders of Alloyd Company, Inc. (plaintiff). In 1989, Gustafson sold the company to Wind Point Partners. The parties’ sales contract stated that revenue figures from the previous year would be used to value Alloyd. When Wind Point discovered that the revenue figures were incorrect, it brought suit against Gustafson under § 12(2) of the Securities Act of 1933, arguing that the sales contract was a prospectus, and that the incorrect revenue figures were a misstatement creating liability on the part of Gustafson. The district court ruled in favor of Gustafson. The court of appeals vacated the district court’s judgment and remanded the case. The United States Supreme Court then granted certiorari.