Legal News

Whatever Happened to Those IPO Lawsuits?

By Dan Slater

With terms like “credit crunch,” “subprime crisis” and “CDS” providing the vocabulary of the current crisis, the term “IPO suit” seems almost retro. After all, the Internet boom is nearly a decade gone. Yet, one of the era’s prominent lawsuits has been sputtering along now for seven years. And a settlement, finally, may be in sight.

At one point, the IPO lawsuits — in which retail investors claimed that investment banks allocated blocks of hot tech IPOs to those institutional investors who agreed to buy more in the after-market, thereby manipulating the market and artificially pumping up share prices — threatened pretty much every investment bank you’ve ever heard of. In 2001, thousands of class actions were filed against 55 underwriters, 310 IPO issuers and hundreds of corporate officers.

But in 2006, the plaintiffs and their lawyers, led by Mel Weiss, suffered a huge setback when the Second Circuit refused to grant class certification. (Here’s an LB post.) At the time, infighting broke out among the plaintiffs lawyers, some of whom believed that Weiss (pictured) should’ve taken a settlement offer when he had the chance.

Now, two years later, plaintiffs may be getting another shot at a settlement, reports the WSJ. In a letter dated Oct. 23, Morrison & Foerster’s Joel C. Haims, a lawyer for IPO issuers, asked for an extension to reply to an amended complaint filed in the cases, saying the parties are working on settlement papers. The defendants have until Jan. 30 to file their reply. A person familiar with the talks told the WSJ that the parties are discussing a settlement with a recovery of less than $700 million.

Full post as published by Law Blog - WSJ.com on October 29, 2008 (boomark / email).