Feeds

Class action lawsuit filed against VA Linux

Legal action follows regulatory probe into tech IPOs

  • alert
  • submit to reddit

The Essential Guide to IT Transformation

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

The Essential Guide to IT Transformation

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
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.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
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.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.