A class-action lawsuit was filed yesterday against online stamps company Stamps.com and its current and former officers, directors and underwriters.
The complaint alleges that Stamps.com, Santa Monica, CA, and its officers and directors violated the Securities Act of 1933 and the Securities Exchange Act of 1934. The suit claims that the company sold Stamps.com common stock in an initial public offering and a secondary offering without disclosing to investors that at least one of the lead underwriters in the IPO had solicited and received excessive and undisclosed commissions from certain investors.
The lawsuit also charges that in exchange for the commissions, lead underwriter BancBoston allocated Stamps.com shares to customers at the IPO price of $11 per share. To receive such allocations at $11, BancBoston's brokerage customers had to agree to buy additional shares in the aftermarket at higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of Stamps.com stock rose was intended to and did drive Stamps.com's share price up to artificially high levels, the lawsuit alleges.
This artificial price inflation, the complaint alleges, allowed both BancBoston and its customers to reap profits by buying Stamps.com stock at the $11 IPO price, then selling it later for a profit at inflated aftermarket prices, which rose as high as $45.81 during its first day of trading.
The lawsuit also charges that Stamps.com was able to price the secondary offering of Stamps.com stock at an artificially high price of $65 per share because of the continued effects of the foregoing violations. Rather than allowing its customers to keep their profits from the IPO, the complaint alleges, BancBoston required its customers to kick back some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact, based on how much profit each investor had made from the IPO stock allocation.
Wolf Haldenstein Adler Freeman & Herz LLP filed the lawsuit in the federal court in New York on behalf of all purchasers of Stamps.com Inc. securities between June 24, 1999, and May 16, 2001.
The following former and current officers and directors of Stamps.com were named as defendants: John M. Payne, John W. LaValle, Thomas H. Bruggere, Mohan P. Ananda, David C. Bohnett, Jeffrey J. Brown, Thomas N. Clancy, G. Bradford Jones, Marvin Runyon, Loren E. Smith and Carolyn M. Ticknor.
Runyon is a former postmaster general, and Loren E. Smith is a former U.S. Postal Service chief marketing officer.
In addition, the former underwriters named were: BancBoston Robertson Stephens Inc.; The Goldman Sachs Group Inc.; Salomon Smith Barney Inc.; and Credit Suisse First Boston Corp.
Kathleen Brush, a Stamps.com spokeswoman, said “Our legal team is evaluating the claims against us, and we intend to aggressively defend ourselves in court.”
The lawsuit was the fourth related to Stamps.com's June 25, 1999 IPO in seven days. Similar suits have been filed against Stamps.com on behalf of investors by New York-based law firm Bull & Lifshitz, Cauley Geller Bowman & Coates and Schiffrin & Barroway.