GST Telecom (GSTX) 4th quarter earning Message Board

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Technology Stocks : GST Telecom (GSTX) 4th quarter earning

GSTX 0.0107

-46.5%

9:59 AM EST

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To: SteveG who wrote (217)	10/21/1999 7:00:00 PM
From: SteveG	Read Replies (1) of 369

from AG Edwards telecom analyst Dave Heger: A class action lawsuit has been filed on behalf of all purchasers of GST stock between 11/4/96 and 10/22/98. The complaint alleges that GST and certain of its former officers and directors participated in fraudulent activity by failing to disclose that these officers and directors had improperly diverted more than $200 million in assets belonging to GST to another company owned primarily by these officers and directors. The suit further alleges that this activity enabled these officers and directors to personally benefit at the expense of GST shareholders. Although the news story did not name the other company involved, it appears that it is Global Light Telecom (formerly GST Global). GST Telecom has also filed suit against Global Light and has been successful in receiving a $30 million settlement with the company. GST had sued Global Light since Global Light had not compensated GST for international telecom projects that GST had initiated and turned over to Global Light. The two companies had agreed on compensation for the exchange, but Global Light did not fulfil the agreement. It is not clear what impact the lawsuit will have on GST, since it is aimed primarily at former directors and officers, but the company is specifically named as well. The company is reviewing the suit and is planning to comment tomorrow morning. We find it interesting that end point for the time period in the lawsuit is October of 1998, a time when all CLEC share prices drastically declined due to a market correction and concerns about CLECs being able to raise additional capital with the high yield debt market drying up. Considering the weak market conditions, we have trouble believing that the share price decline was caused by the disclosure of GST's lawsuit against GST Global, as proposed in the lawsuit. In the time frame after the company filed its lawsuit but before the announcement of a settlement, the share price rebounded significantly, trading well into the teens. We will follow up with additional comments after the company responds to the suit. ~~~~~~ (from out of town - sporadically)

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