Slashdot Mirror
Class Action Lawsuit Against VA
Yahoo has a story up now about
a class action Lawsuit against VA, which is my employer, and owns Slashdot, so
of course I'm biased blah blah. Of course, I have no clue about any of
the stuff in the article because it's about stock allocation by
Credit Suisse during the IPO, and that sort of stuff is way outside
the realm of things I have any understanding of. Update: 01/11 09:58 PM by H : The Milberg people have a website with more info and PDFs about it -- and I just tried VA, who have "categorically no comment."
Every time I see stories about VA, I always read them as something like "Class Action Lawsuit Against Virginia". I bet you're glad that slashdot is not owned by the Commonwealth of Virginia, so act like it!
If an ethical law firm were involved, that would be a different story.
sulli
RTFJ.
There are a slew of lawyers that make a great deal of money friviously suing claiming securities violations.
Many of the companies I own stock in are being sued likewise (Corel, Plug Power, and Citrix).
Although these suits are without merit, they hurt the companies stock prices dramtically: look at each of the above company's history, and see the biggest dip the day after the suit starts (none have recovered).
Often, these suits end if the company can pay the lawyers enough money to "end the suit without predjudice", meaning, the shareholders can continue the suit (if they want), but the lawyers got their money and will run.
There was an article in Forbes a few months back detailing one lawyer who does busines this way (worth over $10B).
The companies and the shareholders (including the plaintifs) will all loose a great deal of money over these suits. The only winners (ever) are the lawyers.
That's why they do it.
When I die, please cast my ashes upon Bill Gates -- for once, make him clean up after me!
OK, so I read the complaint. Here's my understanding of it (which surely some people will later refine/correct)
1.) the prospectus for LNUX claimed that Credit Suisse would get 'n' shares
2.) Credit Suisse actually procured 'n+x' shares.
3.) Credit Suisse then made backroom deals with big Credit Suisse customers to sell them the stock at "better than market, but still not IPO price", in exchange for increased commissions.
4.) This "forced inflation" of the price, caused others to have to pay higher-than-fair value for the stock.
The plaintiffs appear to contend that the offering was illegal because (a) they lied on their prospectus (points 1 and 2 above), and (b) people paid artificially increased prices for the shares (points 3 and 4 above).
Basically. That's certainly not definitive legalese, but its how this untrained guy (who happens to enjoy reading/understanding court documents) would read it.
D
A more likely scenario, from another perspective:
1. VA Linux notices hot market for IPO's
2. VA sees lots of others making huge money from stock offerings
3. VA promotes Linux as 'next big thing'
4. VA associates itself with being the bringer of Linux
5. VA uses Slashdot to bolster that perception by the public
6. VA misleads people into thinking that they actually can provide real value, and be a profitable company.
7. Unwitting investors believe this, and buy the stock.
8. Slashdot founders get millions.
9. VA insiders cash out their options, reaping millions of their own (along with the VC's)
(The CEO, Larry Augustin, made off with $10 Million of stockholder money)
10. VA Linux stock crashes, as they have no possible way of justifying the market cap.
11. VA Linux stock loses 95% of its value
12. The shareholders get pissed off
13. Lawyers find a way for some people to recoup their losses
14. The people who lost money eagerly go after VA.
Folks, do you have ANY idea how much money the VA insiders walked away with? Do you have any idea on WHOSE money that really was? Do you really think that the VA insiders actually earned it, or did they con the public into thinking there was real value?
If you con someone, is it the fault of the con-man, or the fault of the 'idiot', as you say?
This story is repeated every day with different companies. This may be flaimbait, but I think it is about time that company founders start accepting the consequences of misleading a gullible public.
[For the record, I never bought or sold a single share of stock in my life. I just watch with disgust, usually, at the behaviour of these hype-stock companies]
Bastards! How dare they sue anyone or anything affiliated, much less owning, Slashdot!!!
This Cisco exec should then be sued by the shareholders of Cisco for not making a business decision with solely the interests of Cisco the company and its shareholder value in mind. If someone is employed/appointed to the board of a company it is their responsibility to act solely in their interests with respect to his/her authority in the company.
I feel the same way but the truth is that dotcomm boards have been getting away with things that would seem unethical in traditional companies for quite a while. Here's an article on Fortune about some more weird dealings by the board of a dotcomm, most of these seem like fraud or at least seem unethical but so far not that many people seem to be getting punished.
Here's an expose on the shadiest dealing of the New Economy entitled MISADVENTURES IN THE ME-FIRST ECONOMY: Four tales from the ethical gray zone of the Internet economy from Fortune.
Grabel's Law
Obviously there's a whole lot more to this story. I don't dispute its potential news-worthiness and appropriateness for posting here. But the creation of news that is so uncritically "reported" by simply issuing a press release seems somehow opportunistic and irresponsible.
Oh yeah, we're talking about lawyers and news online. Never mind.
-schussat
The hour of noon has passed. Let us go and get some Kentucky Fried Chicken.
- Idiot reads news article that Linux is the next up and coming thing, doesn't really know what linux is...
- VA Linux offers for IPO,
- Idiot makes association between Linux and VA Linux, dreams of getting in early and retiring early begin,
- Life savings are withdrawn from bank and invested saying "How could it fail with LNUX as the stock symbol?"
- VA Linux initially does well, dreams of retiring early are replaced with dreams of owning small nations,
- VA Linux suffers the same fate of many dot coms last year and takes a downturn,
- Idiot's dreams explode and idiots wife starts bitching about loosing their life savings,
- Idiot does the typical thing by not blaming himself for gambling everything on something he knew nothing about, begins looking for scapegoats...
- Idiot meets other idiots and forms a class action lawsuit,
- Lawyers dive in like vultures since they are the only ones who will make any serious money
This story is repeated every day with different companies. This may be flamebait, but I think it is about time that people started accepting the consequences of the risks they take.File this under To Be Ignored
Potato chips are a by-yourself food.
It looks like a few select investors and fund managers were hot to get in on the IPO. Not just anyone can buy IPO shares at the initial price, because those shares are restricted. So the investors paid off Credit Suisse, who were in charge of the IPO, by giving Credit Suisse extra commissions... a deal that Credit Suisse negotiated.
In some cases, the investor's commissions were determined by how much the IPO stock rose, aand therefore how much money the investors made on day one. (Note: and you thought BOXING was fixed...)
Even though CS did the dirty work, this involves VA Linux because it's VA Linux who writes the conditions of the IPO deal. And if not as many shares were available as VA Linux said there would be, they "lied" -- and the rest of the shareholders have gotten a raw deal. And due to supply and demand, if not as many shares were available as VA Linux said there would be -- that would have the effect of driving up the share price even higher at its opening.
- 1. There was something like a 'friends and family' program with the VA Linux IPO, where certain people got shares of VA Linux at the IPO price (this is common in IPOs).
- 2. VA Linux's underwriter, Credit Suisse ('CS') had a 30-day option to sell even more shares of VA Linux at the IPO price, up to 15% of the number of shares in the original IPO (this is also common in IPOs; the underwriter generally exercises the option and sells the shares if the IPO is a hot one).
- 3. The complaint basically says that these 'friends and family' shares and option shares were sold by CS to certain people in ways that gave CS extra benefits, hurting investors who could not buy these shares at the IPO price from CS.
- 4. This has been a sore topic for the SEC lately, where certain people get shares at the IPO price, and then can turn around and tell them immediately after the IPO, turning a very large profit, quickly.
- 5. It really has nothing to do with VA Linux itself, other than the mechanics of VA Linux's IPO.
This begs the question of why Credit Suisse isn't under investigation by the Securities and Exchange Commission and on the receiving end of this lawsuit as well, but I've heard nothing of the sort (so far)...--
These kinds of tort proceedings are very common. Of course, the lawyers who file the lawsuits on behalf of the shareholders typically represent only a small fraction of shareholders. These lawsuits are designed to mainly benefit the law firms which file them, rather than the stockholders. (This, BTW, is the case with most class action lawsuits because they aren't adequately regulated. Lawfirms constantly defend the broken system by claiming that Big Corporations are trying to stop you from suing them.)
This is vulturism, and the whole field needs reform. However, President Clinton has pushed hard against every kind of tort reform effort. Hopefully we'll see something in the near future to stop these stupid and predatory lawsuits.
Well, their stock symbol is LNUX. If you want, you can blame VA for taking that symbol, and thus causing confusion. *shrug*
--
You are quite right. What is particularly interesting is that this was actually a common practice with hot technology IPOs , VA Linux is simply getting the short end of the stick from investors who are pissed of by the stock's massive drop, most companies that drop that far are usually hit by lawsuits from shark's masquearading as lawyers and it's actually a surprise that it took this long. Unfortunately what this means is that if this lawsuit sticks ta lot more tech companies that IPOed in 1999/2000 may face heat for what was at the time a common practice.
PS: Another questionable practice that was quite common in 1999/2000 was giving away lots of shares by CEOs of IPO-track tech companies to executives of potential customers. These executives then made sure the IPO-track company won whatever contract was being vied for which would then make the pre-IPO company a hot stock when it burst on the market.
E.g. www.routerparts.com gives Cisco exec a few shares before their IPO and places him on their board. Cisco exec then makes sure routerparts.com gets a large order from Cisco and tells all his friends about them. routerparts.com now has good buzz since it has made deals with Cisco and other companies and becomes a hot IPO stock. Finally, the Cisco exec unloads the shares and makes several hundred to a few million dollars.
Grabel's Law
Taco doesn't have millions of dollars. He was paid about 6 million in VA stock for the Slashdot buyout. That was over a year ago when VA was selling for over $100/share. Now that it's around $8/share he only has a fraction of what he once had. If anyone should be pissed at VA, it's Taco.
-atrowe: Card-carrying Mensa member. I have no toleranse for stupidity.
The "Lerach" bill
Year 2000 suits
And on Red Herring
When they got sued and lost
Sorry, but anybody who paid the ridiculously high prices in the post-IPO environment and is now sitting on big losses has nobody to blame but themselves (and possibly their investment advisors).
Any sufficiently advanced technology is indistinguishable from a rigged demo
--Andy Finkel (J. Klass?)
Look at the name VA Linux - 'Linux' is the largest portion of the name
This lawsuit is about the aclaimed practices of VA Linux during their IPO - Their sticker name is LNUX I believe (or something very close)
One of the company's biggest focus is on Linux
Any ( and probably all ) these reasons could be why the lawfirm chose to use 'Linux' as the abbreviation of VA Linux. It really does make sense when you think about it.
/. is a commercial entity. goto slashdot.com
Hmmm... Had a look at the second linked webpage. It contains some guff, followed by a bug button saying:
"Click Here to Retain Milberg Weiss"
Now there's a nice target for Amazon to sue... Or maybe they (milbergweiss) already have a patent for 'one click lawyer retaining'?
Sorry, I dislike lawyers and everything related to them. My parents taught me not to lie. Guess their parents did the same, but they obviously interpreted it as 'lie if the price is right'. 'Nuff said...
--frank[at]unternet.org
The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on January 11, 2001, on behalf of purchasers of the securities of VA Linux Systems, Inc. (``Linux'' or the ``Company''...
Further reading of the article produces such phrases as "The action...[is pending]... against defendants Linux, Credit Suisse First Boston Corporation...
They're suing "Linux"?
Any sufficiently well-organized community is indistinguishable from Government.
1. There was something like a 'friends and family' program with the VA Linux IPO, where certain people got shares of VA Linux at the IPO price (this is common in IPOs).
2. VA Linux's underwriter, Credit Suisse ('CS') had a 30-day option to sell even more shares of VA Linux at the IPO price, up to 15% of the number of shares in the original IPO (this is also common in IPOs; the underwriter generally exercises the option and sells the shares if the IPO is a hot one).
3. The complaint basically says that these 'friends and family' shares and option shares were sold by CS to certain people in ways that gave CS extra benefits, hurting investors who could not buy these shares at the IPO price from CS.
4. This has been a sore topic for the SEC lately, where certain people get shares at the IPO price, and then can turn around and tell them immediately after the IPO, turning a very large profit, quickly.
5. It really has nothing to do with VA Linux itself, other than the mechanics of VA Linux's IPO.
6. This is a personal interpretation, not a legal opinion.
"In periods of decline such as the present, the higher truth lies in madness." -- Juergen Habermas
From what I gather, the underwriters (Credit Suisse) were paid to pre-allocate IPO shares to certain investors, and also made quid pro quo deals, where investors were allocated IPO shares in exchange for guaranteeing that they would buy shares at a certain price at a later date. I'm hazy on the SEC rules regarding the first allegation, but I'm pretty sure the second point constitutes illegal price fixing, and is quite verboten. Could be wrong, tho.
Read that article...it describes some of Lerach's tactics in detail, tactics which you can bet your ass he and his partners will employ against VA Linux. (He once sued Sun Microsystems simply because he got left out of a $30M lawsuit settlement; Sun eventually had to pay him $1.5M just to get him to go away.) And check out this Fortune sidebar, too...not even Pikachu is safe from this man...
But he can be beaten...just check out this article...
Eric
--
Be who you are...and be it in style!
ever think that maybe people can do legitimate legal work that involves suing people?
Theoretically, yes.
In this case, they're lawyers. So the answer is no.
.sig: Now legally binding!
Bloody leaches.