Original URL: http://www.theregister.co.uk/2013/10/31/twitter_duped_us_couponclippers_claim/

Twitter duped us, coupon-clippers claim

Lawsuit lands ahead of IPO

By Richard Chirgwin

Posted in Financial News, 31st October 2013 02:32 GMT

The most-anticipated IPO since pets.com Facebook has come under a cloud, with a lawsuit launched accusing Twitter of cancelling a “fraudulently” organised private sale of shares.

In their Manhattan-filed complaint, Precedo Capital Group and Continental Advisors are claiming that Twitter wanted them to organise a private sale of its shares, to help bolster its hoped-for $US10-billion-plus market valuation and lift its IPO price, and then cancelled the deal.

The two financial firms are seeking $US124.2 million in damages: $US24.2 million in compensation and $US100 million in punitive damages. According to Reuters, “Twitter never intended to complete the offering on behalf of Twitter stockholders, in the private market, thereby causing substantial damages to the plaintiffs in the loss of commissions, fees and expenses, as well as through their business reputation”.

The idea of the private sale, the lawsuit says, was to control stock held by staff and contractors by dealing those in the private market, so that cash-ins wouldn't spoil the excitement of a rising price on IPO day.

Twitter has said its shares will be offered at between $US17 and $US20 each, which would give the yet-to-turn-a-profit messaging outfit a market cap at IPO of around $US11 billion.

Reuters states the two coupon-clippers were contacted by Twitter-approved buyer GSV Capital Management to set up a fund to purchase Twitter shares, handling blocks worth $US50 million each to soak up as much as $US278 million worth of employee and contractor shares.

Precedo and Continental claim they'd lined up investors willing to punt $US19 per share before Twitter kiboshed the deal, and believe the whole arrangement, denied by Twitter, was to let the outfit float the claim that private investors were already valuing it higher than the IPO price.

Twitter denies any relationship with either of the two companies. ®