Feeds

Class action lawsuit filed against VA Linux

Legal action follows regulatory probe into tech IPOs

  • alert
  • submit to reddit

Seven Steps to Software Security

A class action lawsuit has been launched against VA Linux on behalf of shareholders who feel they were deceived by the company during its initial public offering (IPO) last year.

The lawsuit, which also names the lead underwriter of the flotation Credit Suisse First Boston and VA Linux executives including Larry Augustin and Todd Schull, contends that VA Linux failed to reveal in its prospectus that shares were promised during the offering to investors who agreed to buy more shares later at predetermined prices in after hours trading.

The legal action follows news that the Securities and Exchange Commission (SEC) is in the process of investigating whether investors in initial public offerings, including VA Linux's, paid inflated commissions on other trades to underwriters in return for preferential share allocations during 'hot' IPOs.

As previously reported, regulators are understood to have already sought information from hedge funds and most major Wall Street securities firms as part of the enquiry, which is believed to go far wider than just VA Linux. Investigators, who are not commenting on the inquiry, are trying to establish a pattern of big allocations in much-anticipated offerings followed by large trades in other stocks.

VA Linux shares went public at $30 and closed after their first day of trading, 9 December 1999, at $239.25 - an almost eight-fold increase in value. This was the biggest-ever first day jump for an IPO.

The class action lawsuit, filed by New York law firm of Milberg Weiss Bershad Hynes & Lerach LLP, argues this rise was due to undisclosed tie-ins, "which locked in demand for Linux shares in the after-market at levels well above the offering price."

A copy of the complaint can be viewed on Milberg Weiss' website here.

One interesting piece of information to come out of the lawsuit is that the SEC is also looking at the IPOs of Ariba and United Parcel Service in connection with its probe. We await developments with interest. ®

Related stories

IPO makes VA Linux instant $10bn company
Could Linux IPOs be a better bet than Web ones?
VA Linux revenues up 547 per cent
VA Linux Systems disputes IDC server market findings

Boost IT visibility and business value

More from The Register

next story
Airbus promises Wi-Fi – yay – and 3D movies (meh) in new A330
If the person in front reclines their seat, this could get interesting
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
Want to beat Verizon's slow Netflix? Get a VPN
Exec finds stream speed climbs when smuggled out
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
US freemium mobile network eyes up Europe
FreedomPop touts 'free' calls, texts and data
Big Blue Apple: IBM to sell iPads, iPhones to enterprises
iOS/2 gear loaded with apps for big biz ... uh oh BlackBerry
Price cuts, new features coming for Office 365 small biz customers
New plans for companies with up to 300 staff to launch in fall
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Mobile application security vulnerability report
The alarming realities regarding the sheer number of applications vulnerable to attack, and the most common and easily addressable vulnerability errors.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.