Dizzie and Etoys filed a lawsuit against Goldman.
Let me make this perfectly clear. I never had sex with etoys or bought their shares.
Ps
Betcha those investors didn't get those shares from a discount on-line broker.
>>Reuters, 05.23.02, 1:40 PM ET
NEW YORK (Reuters) - EToys Inc. , the bankrupt Internet toy seller, Thursday said it has filed a lawsuit against Wall Street firm Goldman Sachs Group Inc. for mishandling its 1999 initial public offering.
The suit -- filed in New York State Supreme Court -- alleges that Goldman, one of the leading underwriters of IPOs, intentionally underpriced eToys' offering and received kickbacks from its customers who profited when the shares soared.
It charges Goldman with fraud and breach of contract and fiduciary duty.
A Goldman spokeswoman declined to comment on the suit, citing company policy.
Thousands of individual investors have sued dozens of investment banks alleging fraud in the way they doled out shares of IPOs. This case -- which echoes a federal investigation into IPO allocation practices -- is unique because a company is suing.
Goldman priced eToys' IPO at $20 a share, and the shares closed at $76.56 in their Nasdaq debut on May 20, 1999, after hitting an intraday high of $85. Shares of eToys now trade on the Pink Sheets -- akin to a minor league exchange for companies booted off the Nasdaq or New York Stock Exchange -- at less than a penny a share.
Goldman knew demand for the stock was such that it would trade much higher than $20, but underpriced the IPO so its customers could reap huge profits, eToys' lawyer, Stanley Grossman told Reuters. The customers had agreed to later share in the profits with Goldman, he said.
Goldman rival Credit Suisse First Boston in January paid $100 million to settle charges it mishandled shares of IPOs during the final days of the 1990s bull market. Regulators accused the firm of charging big customers extraordinarily high commissions in exchange for shares for hot IPOs.
The commissions -- allegedly as high as $3.15 a share versus a typical charge of about 6 cents -- represented a kickback for access to the IPO shares, regulators said.
EToys, which is now known as EBC I Inc., filed for bankruptcy in March 2001, typically a death blow for a company. EToys filed the suit after conducting a more than year-long investigation that included talking to eToys executives and Goldman clients such as hedge funds, Grossman said.
"One doesn't want to take litigation of this type, with these types of allegations against Goldman, unless you feel comfortable about it," Grossman said. "An investigation was required."
Copyright 2002, Reuters News Service |
