Legal News

Long-Running IPO Litigation Reaches $586M Conclusion

By Ashby Jones

Frankly, we’d sort of forgotten about the IPO litigation; the last time it crossed our radar screen was back in October, when word leaked of a possible settlement between a handful of banks and investors who’d bet big — and largely lost — on several big technology IPOs about a decade ago.

But today, like a bolt of blue, we got more news on the litigation: It has settled. Several dozen banks and tech-company insurers have agreed to pay $586 million to shareholders for release of the claims. Click here for the settlement.

In the early reaches of the decade, a group of tech investors sued a handful of banks, accusing banks that underwrote stock offerings of improperly pumping air into the stock-market bubble of the late 1990s and 2000 by requiring investors who got shares of hot tech IPOs to buy more shares at higher prices once trading began. The practice allegedly inflated the share prices of hundreds of tech companies.

The April 1 settlement, which is still subject to court approval, is due to be paid by dozens of banks, including Credit Suisse, Deutsche Bank, Goldman, Sachs and Morgan Stanley. Insurers for technologies companies that issued stock during the relevant period will also contribute to the settlement. Despite the settlement, the defendants have denied wrongdoing.

"We're very pleased that the case has been resolved," said MoFo’s Jack Auspitz, liaison counsel for the issuer defendants. Sullivan & Cromwell’s Vince DiBlasi, liaison counsel for the bank defendants, did not return a call for comment.

"We are very pleased that we are close to obtaining a significant cash recovery for investors who were damaged by the conduct of investment banks and others almost ten years ago during the IPO craze," says Bernstein Liebhard’s Stanley Bernstein, chair of the plaintiffs' executive committee. The lawyers will also seek reimbursement for $56 million in expenses incurred during the litigation.

Thing is, the $586 million coulda been a lot more. In 2006, the Second Circuit overturned a lower-court ruling that the case could be brought as a class action on behalf of all investors in the public offerings at issue. The ruling negated tentatitve settlements that stood to yield investors over $1 billion.

Correction: The headline of an earlier version of this post incorrectly pegged the settlement figure at $568 million.

Full post as published by Law Blog - WSJ.com on April 06, 2009 (boomark / email).