Consolidated IPO Class Action Settlement Given Green Light

by Glen Shapiro, LawAndTax-News.com, New York

17 February 2005

In a 52 page opinion issued on Tuesday, Judge Shira Scheindlin gave her tentative approval to a settlement agreed in 2003 in class action suits brought by investors against some 300 companies which held their initial public offerings at the height of the IT bubble, and the banks and institutions which handled those IPOs.

In the more than 800 suits consolidated before Judge Scheindlin at the US District Court for the Southern District of New York, it was alleged that analyst conflicts and other improper behaviour skewed the process of going public for many internet start-ups.

Many of the affected investors also argued that the investment banks handling such IPOs often sought to manipulate share prices by requiring institutional customers interested in popular IPOs to invest in other launches as a condition of participation in the 'hot' offering.

The settlement given the green light by Judge Scheindlin on Tuesday sets a $1 billion limit for investor claims from the issuing companies, and offsets any amount that they may receive from the investment bank which handled the IPO.

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