I just heard some sad news on talk radio - Horror/Sci Fi actor Ronald Reagan was found dead in his Bel Air home this morning. There weren't any more details. I'm sure everyone in the Slashdot community will miss him - even if you didn't enjoy his bombs, there's no denying his contributions to popular poverty. Truly an American icon.
IPO VIEW - Rising tide of law suits keeps IPO market busy
By Elena Molinari
NEW YORK, Aug 19 (Reuters) - The market for new stock offerings has dried up, but a rising tide of legal wrangling is keeping Wall Street bankers busy.
No initial public offerings are expected this week. And only one company, reinsurer Max Re Capital Ltd., made it to market last week. That brought this year's IPO tally to 61 -- 80 percent less than a year ago -- and the total amount raised to $27.5 billion, considerably down from $60.7 billion in the same period of 2000.
At the same time, lawsuits are filed every week against companies that went public during the IPO craze of 1999 and early 2000 and their underwriters -- the Wall Street firms that marketed the offerings.
The suits essentially claim investment banks and their big customers conspired to inflate prices of newly public companies. Those deals caused many IPOs to skyrocket on their first day of trading only to deflate later, hurting small investors who bought into the craze, the suits allege.
Wall Street executives by-and-large maintain it was business as usual during the IPO boom -- with orderly distribution of shares and no secret deals to inflate prices. Insatiable demand for Web companies caused the bubble, they say.
It's tough to keep track of the complaints, because many are filed each day and some target the same company or investment bank. As of Wednesday, Aug. 15, the U.S. District Court for the Southern District of New York had received 680 complaints. At least 50 new cases were filed last week alone.
The suits could be the real star of the IPO market in the next months, possibly resulting in billion-dollar settlements by Wall Street firms, plaintiffs' lawyers say. Even the start-up companies that raised money could be on the hook, if investors prove the IPO prospectus was misleading and failed to disclose the alleged secret agreements between bankers and institutions, they say.
That's what plaintiffs will try to prove in the case against supplier of Web-based software VA Linux Systems Inc. Linux's stock had the biggest first-day pop ever, rising 698 percent when it started trading on December 1999, and has become the symbol of the IPO excesses. The company's shares closed Friday at $1.83 on Nasdaq
That case by itself could turn into several million of dollars, said Melvyn Weiss, partner of New York law firm Milberg Weiss Bershad Hynes & Lerach, which is the lead counsel in the case against Linux and its underwriters. Milberg -- a firm specializing in shareholder law suits -- already has filed 134 IPO-related lawsuits.
The first deadline for the cases alleging securities fraud is Sept. 7, when Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York will hold a first hearing.
LAWYERS FOLLOW SEC PROBE
The suits, most of which are seeking class action status, are riding on the coattails of regulatory and criminal probes into the way Wall Street firms doled out IPOs. The U.S. attorney's office in Manhattan, the Securities and Exchange Commission and the National Association of Securities Dealers all are conducting their own investigations.
Both the criminal and the civil lawsuits allege that, when the demand for new stocks reached its peak in 1999, it was common for institutional investors to enter quid-pro-quo agreements with investment bankers to get shares of the most sought-after deals.
Some institutions paid Wall Street firms set a percentage of their IPO profits in unusually high trading commissions or agreed to buy more of the new issue on the first day of trading -- guaranteeing a ``pop,'' or solid rise in the new issue's stock price, the suits allege. That practice artificially inflated the prices of many new stocks, mostly in the Internet and technology sectors, on their first trading day, the suits claim.
Chances that shareholders can recover the damages they allegedly suffered largely depend on the success of the government's probe, securities law experts say.
``It's costly and difficult for law firms to prove these frauds,'' said Jack Keeney, a lawyer at Washington law firm Hogan & Harston. ``And usually cases filed following a federal investigation tend to have more merit and settle on higher amounts than suits brought independently.''
The suits already have put the spotlight on investment bankers and the way they manage IPOs.
``Brokerage houses are going to be more cautious in allocating IPO shares in the future,'' said John Coffee, professor of securities law at Columbia University. ``In this market, however, some manipulations wouldn't even be possible. I don't see the same inflated expectations of big gains that generated past excesses.''
But some things will never change.
``Even in a slow market, the best deals always go to the big money managers,'' said Ross Sakamoto, portfolio manager of the Chase H&Q IPO Emerging Company Fund.
Slashdot Mirror
I just heard some sad news on talk radio - Horror/Sci Fi actor Ronald Reagan was found dead in his Bel Air home this morning. There weren't any more details. I'm sure everyone in the Slashdot community will miss him - even if you didn't enjoy his bombs, there's no denying his contributions to popular poverty. Truly an American icon.
As soon as VA Linux goes out of business and Slashdot is shut down.
And right into my ass.
By Elena Molinari
NEW YORK, Aug 19 (Reuters) - The market for new stock offerings has dried up, but a rising tide of legal wrangling is keeping Wall Street bankers busy.
No initial public offerings are expected this week. And only one company, reinsurer Max Re Capital Ltd., made it to market last week. That brought this year's IPO tally to 61 -- 80 percent less than a year ago -- and the total amount raised to $27.5 billion, considerably down from $60.7 billion in the same period of 2000.
At the same time, lawsuits are filed every week against companies that went public during the IPO craze of 1999 and early 2000 and their underwriters -- the Wall Street firms that marketed the offerings.
The suits essentially claim investment banks and their big customers conspired to inflate prices of newly public companies. Those deals caused many IPOs to skyrocket on their first day of trading only to deflate later, hurting small investors who bought into the craze, the suits allege.
Wall Street executives by-and-large maintain it was business as usual during the IPO boom -- with orderly distribution of shares and no secret deals to inflate prices. Insatiable demand for Web companies caused the bubble, they say.
It's tough to keep track of the complaints, because many are filed each day and some target the same company or investment bank. As of Wednesday, Aug. 15, the U.S. District Court for the Southern District of New York had received 680 complaints. At least 50 new cases were filed last week alone.
The suits could be the real star of the IPO market in the next months, possibly resulting in billion-dollar settlements by Wall Street firms, plaintiffs' lawyers say. Even the start-up companies that raised money could be on the hook, if investors prove the IPO prospectus was misleading and failed to disclose the alleged secret agreements between bankers and institutions, they say.
That's what plaintiffs will try to prove in the case against supplier of Web-based software VA Linux Systems Inc. Linux's stock had the biggest first-day pop ever, rising 698 percent when it started trading on December 1999, and has become the symbol of the IPO excesses. The company's shares closed Friday at $1.83 on Nasdaq
That case by itself could turn into several million of dollars, said Melvyn Weiss, partner of New York law firm Milberg Weiss Bershad Hynes & Lerach, which is the lead counsel in the case against Linux and its underwriters. Milberg -- a firm specializing in shareholder law suits -- already has filed 134 IPO-related lawsuits.
The first deadline for the cases alleging securities fraud is Sept. 7, when Judge Shira Scheindlin of the U.S. District Court for the Southern District of New York will hold a first hearing.
LAWYERS FOLLOW SEC PROBE
The suits, most of which are seeking class action status, are riding on the coattails of regulatory and criminal probes into the way Wall Street firms doled out IPOs. The U.S. attorney's office in Manhattan, the Securities and Exchange Commission and the National Association of Securities Dealers all are conducting their own investigations.
Both the criminal and the civil lawsuits allege that, when the demand for new stocks reached its peak in 1999, it was common for institutional investors to enter quid-pro-quo agreements with investment bankers to get shares of the most sought-after deals.
Some institutions paid Wall Street firms set a percentage of their IPO profits in unusually high trading commissions or agreed to buy more of the new issue on the first day of trading -- guaranteeing a ``pop,'' or solid rise in the new issue's stock price, the suits allege. That practice artificially inflated the prices of many new stocks, mostly in the Internet and technology sectors, on their first trading day, the suits claim.
Chances that shareholders can recover the damages they allegedly suffered largely depend on the success of the government's probe, securities law experts say.
``It's costly and difficult for law firms to prove these frauds,'' said Jack Keeney, a lawyer at Washington law firm Hogan & Harston. ``And usually cases filed following a federal investigation tend to have more merit and settle on higher amounts than suits brought independently.''
The suits already have put the spotlight on investment bankers and the way they manage IPOs.
``Brokerage houses are going to be more cautious in allocating IPO shares in the future,'' said John Coffee, professor of securities law at Columbia University. ``In this market, however, some manipulations wouldn't even be possible. I don't see the same inflated expectations of big gains that generated past excesses.''
But some things will never change.
``Even in a slow market, the best deals always go to the big money managers,'' said Ross Sakamoto, portfolio manager of the Chase H&Q IPO Emerging Company Fund.