Shareholders who lost billions of dollars in the internet boom and bust are fighting back in a series of crippling class action lawsuits.
A report in today's Times newspaper says that Wall Street banks are facing up to 100 of these lawsuits, brought by shareholders who claim that bankers artificially inflated the flotation prices of dot.com stocks. The lawsuits allege that bankers used illegal techniques to pump up prices when the stocks were first offered for sale. Many internet stocks have seen prices fall dramatically almost immediately after flotation.
The suits involve companies such as music site MP3.com, online advertising company Doubleclick, and internet software firm Ariba. Ariba first traded on Nasdaq in June 1999 for $23 per share; yesterday the stock price closed at $6.70. MP3.com was worth $1.87bn at its flotation in July 1999. Today the company is worth $325m.
The lawsuits - 21 of which have already been filed in Manhatten federal courts - are further hitting share prices as both the banks and dot.coms struggle to cope with legal fees. Some of Wall Street's biggest banks have been named in the lawsuits, including Bear Stearns, Credit Suisse First Boston, Merrill Lynch and Salomon Smith Barney, according to the Times. All deny any wrongdoing.
The US Securities and Exchange Commission is already investigating claims that some bankers accepted bribes from clients to allocate them shares in the initial public offering of certain internet companies. The SEC investigation also covers allegations of "laddering", a practice in which bankers ensure that a stock's price will continue to rise after flotation by lining up clients to buy stock at a set price on a set date.
Related stories
26.05.2001: Lawyers count cost of aborted floats
08.05.2001: A second look at the Guardian's e50
The e50: After the goldrush
Useful links
IPO.com
Nasdaq
Doubleclick
Ariba
MP3.com
