Feeds

Class action lawsuit filed against VA Linux

Legal action follows regulatory probe into tech IPOs

  • alert
  • submit to reddit

New hybrid storage solutions

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 next step in data security

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Murdoch to Europe: Inflict MORE PAIN on Google, please
'Platform for piracy' must be punished, or it'll kill us in FIVE YEARS
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Found inside ISIS terror chap's laptop: CELINE DION tunes
REPORT: Stash of terrorist material found in Syria Dell box
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
prev story

Whitepapers

Providing a secure and efficient Helpdesk
A single remote control platform for user support is be key to providing an efficient helpdesk. Retain full control over the way in which screen and keystroke data is transmitted.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Saudi Petroleum chooses Tegile storage solution
A storage solution that addresses company growth and performance for business-critical applications of caseware archive and search along with other key operational systems.
Protecting users from Firesheep and other Sidejacking attacks with SSL
Discussing the vulnerabilities inherent in Wi-Fi networks, and how using TLS/SSL for your entire site will assure security.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.