IBUY holds itself out as an innovative Internet-based
electronic retailer that markets an immense selection of brand name
consumer and commercial products at low prices via its website
using state-of-the-art proprietary technology. During the Class
Period, the defendants, including IBUY, its senior-most officers
and directors and its underwriter Waldron & Co. ("Waldron"),
participated in a scheme and wrongful course of business to
manipulate the price of IBUY stock, which scheme included: (i)
defendant Waldron's refusal to execute sell orders; (ii) the use of
illegal stock parking; (iii) the use of illegal above-market buy-
ins to intimidate and dissuade potential short sellers from selling
IBUY stock short; (iv) the sale of IBUY shares to discretionary
accounts without regard to suitability; and (v) the dissemination
of materially false and misleading statements about IBUY's
operating performance and its future prospects. The defendants'
scheme in connection with and subsequent to the Company's November
1997 initial public offering ("IPO"), enabled the defendants to
raise $11.7 million by selling 1.3 million IBUY shares to the
public at $9 per share and thereafter drive the price of IBUY's
- 1 -
--------------------------------------------------------------------------------
stock to an all time high of over $32 per share in March 1998. The
defendants engaged in this illegal scheme in order to bring IBUY
public and thereafter avoid a total collapse in the price of IBUY
stock as the truth about the Company's misconduct came to light.
3. As part of defendants' scheme to avert a collapse in
IBUY's stock price, once the Company became public, Waldron
employed various illegal tactics which included fraudulent refusals
to execute customers' sales orders, stock parking and forced buy-
ins at prices more than 50% above IBUY's trading price. The effect
of these illegal practices was to stimulate artificial activity in
the stock and manipulate its price. As a result of this
coordinated manipulation by the defendants, the market
capitalization for IBUY, a company with minimal sales and a
history of losses, came to exceed $200 million.
securities.stanford.edu |
