Lawsuit Filed Against Palm for Stock Price Manipulation
A securities class action lawsuit was filed on behalf of everyone who acquired Palm, Inc. common stock between March 1, 2000 and December 6, 2000. The suit alleges that Palm executives and the companies that did underwriting for Palm's IPO conspired together to artificially drive up the price of Palm's shares.
The complaint alleges that, in exchange for the excessive commissions, members of the underwriting brokerage companies sold Palm stock to customers at the IPO price of $38 per share. To do this, the underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices.
The requirement that customers make additional purchases at progressively higher prices as the price of Palm stock rocketed upward (a practice known on Wall Street as ``laddering'') was intended to (and did) drive Palm's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the underwriters and their customers to reap enormous profits by buying stock at the $38 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $165 on March 2, 2000, its first day of trading.
Named as defendants in the complaint are Palm and Carl Yankowski and Judy Bruner, who are executive officers of Palm. The complaint also names as defendants the following underwriters of Palm's initial public offering: Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated, FleetBoston Robertson Stephens, Inc., and Salomon Smith Barney, Inc.
The case is pending in the United States District Court for the Southern District of New York and has been assigned docket number 01-CV-5923. A copy of the complaint is available from the Court or from Bernstein Liebhard & Lifshitz, LLP (800-217-1522).
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