Nasdaq: LOAX News! Log On America Takes Legal Action Against 4 Preferred Shareholders
Business Editors & Legal Writers
PROVIDENCE, R.I.--(BUSINESS WIRE)--Aug. 21, 2000--Log On America,
Inc. (NASDAQ: LOAX) today commenced legal proceedings in the United
States District Court, Southern District of New York, against the four
institutional investors and certain of their affiliates which hold the
Company's Series A Convertible Preferred Stock and Warrants. The
action alleges that the holders of the Preferred Stock engaged in a
scheme to manipulate and intentionally drive down the trading price of
the Company's Common Stock and have violated Federal securities laws.
The Company also said that it will not honor requests for
conversion of the Preferred Stock and will not register the Common
Stock underlying the Preferred Stock. The Company has requested
declaratory relief from the Court, seeking termination of the
conversion rights of the preferred holders based upon their market
manipulation, fraudulent conduct and 10b-5 violations.
In addition to today's action, several other public companies have
recently brought public actions against certain institutional
investors, including two of the defendants named in the Company's
complaint, alleging breech of the securities laws and market
manipulation in connection with similar convertible issues.
Recent articles in the business media have drawn more scrutiny to
these abuses. A May 17, 1998 New York Times article observed, "Such
short selling is illegal if used to manipulate the market for profit.
And big profits are clearly possible: Once the price is down, an
investor can convert preferred shares for large amounts of the
company's stock, use some to repay the borrowed shares, bank profits
from the short sale and own as many shares in the company as when he
started, or more."
Log On America issued the convertible preferred shares and
warrants on February 22, 2000. The complaint alleges that as a result
of the defendants' fraudulent conduct, and abusive shorting of the
Company's common stock, the Company's common stock declined from $ 17
at the preferred issue date to less than $ 3.00 per share at Friday's
close.
Earlier this month, Log On America reported a 28% revenue gain in
the second quarter ended June 30th and an EBITDA loss of $4.8 million.
Capital spending in the first half totaled approximately $10 million,
primarily related to the initial build out of its network. Capital
availability totaled $44 million at June 30th, consisting of $20
million in cash and liquid investments and $24 million in various
credit facilities.
"From an operational viewpoint, we are ahead of plan and believe
that our plan will build shareholder value. We are bringing this
action, which we intend to pursue vigorously, to defend that value,"
David Paolo, Chairman and Chief Executive Officer, said.
Log On America, Inc. is a rapidly growing switched
facilities-based D-CLEC+ providing broadband communications and data
services to the commercial and small office/home office (SOHO)
markets. With a focus on the Northeast Regional Market, the company
provides local dial tone, in-state toll, long distance, and high-speed
Internet access and high-speed Internet access solutions over
traditional copper wire using DSL technology to residential and
commercial clients throughout the Northeast. For more information on
Log On America, please see the Company's Web site at
loa.com.
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CONTACT: Peter Silverman, 212-779-8600
Legal Counsel
or
Investor Access Corp.
Michael Seely, 212/679-0652 |
