Other actions have been filed making similar allegations regarding the IPOs of more than 300 other companies. All of these have been coordinated for pretrial purposes as In re Initial Public Offering Securities Litigation, Civil Action No. 21-MC-92.
According to a Press Release dated November 27, 2001, the lawsuit asserts claims under Section 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover damages. In exchange for the excessive commissions, the complaint alleges, defendant allocated Agilent shares to customers at the IPO price of $30.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $30.00, 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 price of Agilent stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive Agilent's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the defendant underwriters and their customers to reap enormous profits by buying Agilent stock at the $30.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $50.00 during its first day of trading. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the defendant underwriters required their customers to "kick back" some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation.
The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the Agilent offering contained material misstatements regarding the commissions that the defendant underwriters would derive from the IPO and failed to disclose the additional commissions and "laddering" scheme discussed above.