Processing your request


please wait...

Case Page

 

Case Status:    SETTLED
On or around 10/06/2009 (Date of order of final judgment)

Filing Date: November 16, 2001

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 16, 2001, the complaint alleges that Fatbrain.com, Inc. (which is not named as a defendant) and certain of its officers and directors at the time of its IPO violated the federal securities laws by issuing and selling Fatbrain common stock pursuant to the initial public offering without disclosing to investors that several of the underwriters of the IPO had solicited and received excessive and undisclosed commissions from certain investors.

In exchange for the excessive commissions, the complaint alleges, lead underwriters Banc of America Securities LLC, U.S. Bancorp Piper Jaffray Inc. and Needham & Company, Inc. and underwriters FleetBoston Robertson Stephens, Inc., Chase H&Q (f/k/a Hambrecht & Quist LLC) and Morgan Stanley Dean Witter & Co., Inc. allocated Fatbrain shares to customers at the IPO price of $10.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $10.00, 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 Fatbrain stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive Fatbrain'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 Fatbrain stock at the $10.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $24.50 during its first day of trading.

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 contained material misstatements regarding the commissions that the underwriters would derive from the IPO and failed to disclose the additional commissions and "laddering" scheme discussed above.

Protected Content


Please Log In or Sign Up for a free account to access restricted features of the Clearinghouse website, including the Advanced Search form and the full case pages.

When you sign up, you will have the option to save your search queries performed on the Advanced Search form.