In December 2006, the appellate court overturned the certification of classes in six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification was a condition of the settlement, it was unlikely that the settlement would receive final Court approval. On June 28, 2007, the Court entered an order terminating the proposed settlement based upon a stipulation among the parties to the settlement.
This is one of a number of actions coordinated for pretrial purposes as In re Initial Public Offering Securities Litigation, 21 MC 92 with the first action filed on January 12, 2001. Plaintiffs in the coordinated proceeding are bringing claims under the federal securities laws against numerous underwriters, companies, and individuals, alleging generally that defendant underwriters engaged in improper and undisclosed activities concerning the allocation of shares in the IPOs of more than 300 companies during late 1998 through 2000. In June 2004, a stipulation of settlement and release of claims against the issuer defendants, including the Company, was submitted to the court for approval. The terms of the settlement if approved, would dismiss and release all claims against the participating defendants (including the Company). In exchange for this dismissal, D&O insurance carriers would agree to guarantee a recovery by the plaintiffs from the underwriter defendants of at least $1 billion, and the issuer defendants would agree to an assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On August 31, 2005, the court confirmed preliminary approval of the settlement.
According to a Press Release dated May 8, 2001, a law suit was filed against Multex.com, Inc. The lawsuit asserts claims under Sections 11, 12, 15 of the Securities Act of 1933, and Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 as well as Rule 10b-5. The complaint alleges that Multex.com, and certain of its officers, directors, and auditors violated the federal securities laws by issuing and selling Multex.com common stock pursuant to the IPO without disclosing to investors that at least one of the lead underwriters, and three of the other underwriters in the offering had solicited and received excessive and undisclosed commissions from certain investors. In exchange for the excessive commissions, the complaint alleges, the underwriters allocated Multex.com shares to customers at the IPO price of $14.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $14.00, the defendant underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the Multex.com stock rocketed upward (a practice known on Wall Street as 'laddering') was intended to (and did) drive Multex.com's share price up to artificially high levels. The complaint alleges, that the artificial price inflation enabled both the underwriters and their customers to reap enormous profits by buying Multex.com stock at the $14.00 IPO price, and then selling it later for a profit at inflated aftermarket prices, which rose as high as $38.63 during its first day of trading. The complaint further alleges that defendant underwriters required their customers to 'kick back' some of their profits in the form of secret commissions, rather than allowing them to keep their profits from the IPO.