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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Cactus Jack who wrote (40702)	8/29/2001 11:43:35 AM
From: stockman_scott	Read Replies (1) \| Respond to of 65232

IPOs Still Have Upside for Law Firms Wednesday August 29, 11:21 am Eastern Time By Elena Molinari NEW YORK (Reuters) - For some, a new stock offering gone awry is worth more than a successful one. Lawyers are the only characters involved in the initial public offering drama of the late 1990s still making money as a consequence of those deals, and keeping their reputations clean so far. The other actors -- disgruntled investors, ailing dot-coms and investment bankers under regulatory scrutiny -- are licking their wounds. A rash of lawsuits by investors trying to recoup losses in IPOs is turning into a boon for the legal profession. The suits are bringing in steady fees at a time securities-related business, like IPOs and merger advisory, is tapering off. Lawyers aren't earning the kind of money made by the Wall Street banks that helped companies sell their shares, typically 7 percent of the raised capital. Nor do the fees amount to the estimated $3 million in stock and cash law firms made on a typical hot IPO last year. But it's still a steady flow of cash -- at least several hundred dollars an hour -- that increases each time a new IPO-related lawsuit is filed. And that happens every day. ``Representing companies in securities litigations is very respectable and remunerative,'' said Scott Schreiber, attorney at the Washington, D.C.-based law firm Arnold & Porter. Law firms are paid mostly by the hour, but in longer cases they can receive a monthly fee, he added. To be sure, law firms that specialized in high-tech start-up companies are feeling the pinch of the dot-com bust. Cooley Godward of San Francisco recently laid off 13 percent of its attorneys partly because its once blossoming merger advisory business had dried up. But defending against angry shareholders is booming. More than 150 companies this year have been sued in over 700 complaints alleging that secret agreements between the companies and their underwriters artificially inflated stock prices on their first trading day. The shareholders have not yet sued the IPO's legal advisers, and two experts told Reuters lawyers can't be held liable for their work on a new stock offering. The list includes most of the companies whose stocks enjoyed the biggest first-day gains ever, up to 600 percent. Names like software makers FreeMarkets Inc. (NasdaqNM:FMKT - news) and VA Linux Systems Inc. (NasdaqNM:LNUX - news), and Internet data delivery services provider Akamai Technologies Inc. (NasdaqNM:AKAM - news). Most of the corporate defendants have gone back to the law firms that signed off on their IPO prospectuses. The first hearing for the cases is scheduled for next week in the U.S. District Court for the Southern District of New York. Legal fees are among the highest fixed expenses for a company wanting to go public. In 1999 they amounted to about half a million dollars. In many cases -- over one-third of the 450 IPOs closed in 1999 -- lawyers also bargained for shares in the public company-to-be. Those stock awards amounted to an average $1 million (at the time of the IPO) in 1999 and $2.3 million in 2000, according to research firm Equilar Inc. Stock compensation has lost its allure in the slumping stock market. This year, only nine law firms have accepted shares in lieu of cash to advise an IPO. The average legal fee, in the meantime, has jumped to $1.1 million. The amount law firms can pocket during a civil suit depends on the length and complexity of the case, and some say the sum can top an IPO's legal fees. ``There is big money to be made in those cases,'' said Jennifer Vaughan, executive editor of the Class Action Law Monitor, a twice-monthly magazine of Strafford Publication Inc. Some of the nation's biggest law firms, which had a role in the hottest IPOs, told Reuters they now are representing these same companies against the shareholder lawsuits. Cooley Godward, which was legal counsel in 90 IPOs over the past three years, represents nine sued companies, including Tivo Inc.(NasdaqNM:TIVO - news). Testa, Hurwitz & Thibeault LLP is working on the litigation of Red Hat Inc. (NasdaqNM:RHAT - news), among others. Wilson Sonsini Goodrich & Rosati, the largest law firm on the West Coast, which participated in 210 IPOs since mid-1998, represents VA Linux, whose shareholders are trying to recoup huge losses. ``When it comes to IPOs, lawyers have the best part of the deal,'' said John Fitzgibbon, editor of IPO Desktop. ``No matter how they turn out, for them it's a win situation.''