[Top][All Lists]

[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

Re: The GNU Philosophy: How practical is it?

From: Alexander Terekhov
Subject: Re: The GNU Philosophy: How practical is it?
Date: Mon, 30 Apr 2007 16:59:37 +0200

Barry Margolin wrote:
> If there was a particular fraud scheme that you're referring to, I don't
> happen to know about it -- I never invested in any Linux companies and
> didn't follow the market in them.  


Some of the most dramatic instances of improper profit-sharing occurred
in connection with the VA Linux Systems, Inc. ("Linux") IPO. CSFB, as
lead underwriter, distributed approximately 4.1 million shares of the
5.060 million shares offered through underwriters. The Linux IPO was
priced at $30 per share. The IPO opened on December 9, 1999 and closed
at a price of $239.25 per share, an unprecedented increase of over 697
percent. In order to funnel IPO profits to CSFB, Customers that received
at least 405,398 shares engaged in large transactions in highly liquid
large capitalization securities at excessive commission rates. 

(CSFB settled by paying monetary sanction of $50 million to SEC and $50
million to NASD.)

Red Hat's case:

The original complaint alleges violations of Sections 11, 12(a)(2) and
15 of the Securities Act of 1933 and Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On August
11, 1999, Red Hat commenced an initial public offering of 6 million of
its shares of common stock at an offering price of $14 per share (the
"Red Hat IPO"). In connection therewith, Red Hat filed a registration
statement, which incorporated a prospectus (the "Prospectus"), with the
SEC. The complaint further alleges that the Prospectus was materially
false and misleading because it failed to disclose, among other things,
that: (i) Goldman Sachs and Credit Suisse had solicited and received
excessive and undisclosed commissions from certain investors in exchange
for which Goldman Sachs and Credit Suisse allocated to those investors
material portions of the restricted number of Red Hat shares issued in
connection with the Red Hat IPO; and (ii) Goldman Sachs and Credit
Suisse had entered into agreements with customers whereby Goldman Sachs
and Credit Suisse agreed to allocate Red Hat shares to those customers
in the Red Hat IPO in exchange for which the customers agreed to
purchase additional Red Hat shares in the aftermarket at pre-determined

And finally,

The Initial Public Offering ("IPO") Securities Litigation consists of
309 class actions involving more than 300 IPOs marketed between 1998 and


On December 5, 2006, the United States Court of Appeals for the Second
Circuit vacated the decision by the United States District Court for the
Southern District of New York certifying as class actions six “focus
cases” in the Initial Public Offering Securities Litigation. At present,
it is not known what impact, if any, the Second Circuit’s decision will
have upon the proposed settlement between the plaintiffs and the issuer
defendants and their directors and officers, which would guarantee at
least $1 billion to investors who are class members from the insurers of
the issuers announced on June 26, 2003, or upon the plaintiffs’ proposed
settlement with J.P. Morgan Chase & Co. for $425 million announced on
April 20, 2006. Nor is it known what ultimate impact the Second
Circuit’s decision will have upon the cases that comprise the Initial
Public Offering Securities Litigation.


reply via email to

[Prev in Thread] Current Thread [Next in Thread]