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| 2001 News and Press Releases |
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HEADLINE ARCHIVED:
Corporate And Securities Litigation The Dot-Com Plunge: Underwriters' Liability
By: Leon P. Gold And Richard L. Spinogatti
PrimeZone Media Network, Inc., November 14, 2001
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Excerpt: In the late 1990s, the financial markets experienced an initial public offerings boom of internet-related dot-com and technology companies. Given an unusually long-lived bull market and a seemingly mystical belief that any technology or Internet company stock would produce remarkable returns, these IPOs successfully went public despite a lack of significant earnings and operations history, with officers only recently out of school and with prospectuses that disclosed these deficiencies. These stock offerings were promoted in part by the financial media, including daily television programs analyzing every increase in every dot-com and technology stock and commentary by investment firms through analysts that became media stars. Thereafter, with financial indexes plummeting because of a bear market and a recession, many of these IPO purchasers suffered substantial losses on their investments. These investors are turning to the courts, instituting federal class actions under the securities laws and seeking to recoup their losses from the only deep pockets available, the investment bankers who were underwriters for these IPOs and who often provided their analysts as guests on financial television programs. The complaints of these plaintiffs appear more creative than in the past, in order to deal with the fact that investors purchased these stocks despite negative disclosures, which in the past would have prevented the IPO from proceeding at all, and to overcome the argument that plaintiffs were relying primarily on the widespread belief that IPOs of dot-com and technology companies would succeed regardless of their financial merit. Thus, prestigious investment banking firms, such as The Goldman Sachs Group Inc., Morgan Stanley Dean Witter & Co. (Morgan Stanley) and Merrill Lynch, Pierce, Fenner & Smith Inc., have found themselves named as defendants and facing allegations that they violated the securities laws in connection with these dot-com IPOs.[1]
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