Issuer Settlement In IPO Allocation Cases Approved

The plaintiffs and the issuer defendants in the IPO allocation cases have obtained preliminary court approval of their $1 billion settlement, originally agreed to back in June 2003. The cases were brought against nearly 300 companies and 55 investment banks involved in initial public offerings during the tech boom. The plaintiffs generally allege that the defendants ramped up trading commissions in exchange for providing access to IPO shares and required investors allocated IPO shares to buy additional shares in the after-market to help push up the share price. The Washington Post has an article on the court’s decision.

Quote of note (Washington Post): “‘Despite the apparent magnitude of the billion-dollar guarantee, this settlement is not solely — or even primarily — about monetary recovery,’ Scheindlin said. The judge said the real value is in the companies’ agreement to aid the investors’ suits against the banks. The start-ups also agreed to allow investors to file suits to pursue the companies’ claims that the banks didn’t raise enough money in the IPOs. ‘The value of each of these benefits should not be understated,’ Scheindlin wrote. The Internet companies ‘know far better than the plaintiff classes precisely what occurred in the period leading up to and including their IPOs.'”

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