Friday, April 21, 2006

IPO - Are the Dominoes Starting to Fall?

According to press reports here (AP via and here (W$J) JPMorgan Chase & Co., has agreed in principle to pay $425 million to settle claims brought against it in the In re Initial Public Offering Sec. Litig., pending before Judge Shira A. Scheindlin in the Southern District of New York.

The so called "IPO Allocation" cases allege (as summarized here by the 10b-5 Daily) that the issuers and/or underwriters:
manipulated the market with optimistic research; ramped up trading commissions in exchange for access to IPO shares; and that investors allocated IPO shares were required to buy shares in the after-market to help push up the share price.
JPMorgan is the first of the 55 investment banks to settle. No word on whether JPMorgan's decision to be the first to settle was impacted by their prior decision in the WorldCom litigation, to reject an early settlement offer, a move that resulted in JPMorgan later agreeing to pay $2 billion - $630 million or 46% more than the earlier, rejected settlement offer. For a thorough article on the settlement process in WorldCom see Breaking the Banks - The Inside Story of the $6.1 billion WorldCom Settlement, the cover story of Litigation 2005, a supplement to The American Lawyer and Corporate Counsel.

The JPMorgan settlement in the IPO cases follows a June 2003 settlement with the issuers and individual defendants that guaranteed a "floor" for later settlements of $1 billion.

Plaintiff's counsel in the IPO cases have set up a website here, with copies of the amended complaints and many of the other pleadings.

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