DoubleClick Inc. has been hit with three class-action lawsuits alleging that it made “false and misleading” statements in the prospectus for its initial public offering in February 1998 by failing to disclose that its underwriters gave preferential treatment to certain institutional customers at the expense of the general public.
DoubleClick shareholder Barbara Eiseman and an unnamed number of shareholders, which could amount to thousands of plaintiffs, brought the lawsuits, which were filed May 14 in U.S. District Court for the Southern District of New York. The lawsuits name DoubleClick and four senior executives of the company as well as Merrill Lynch and Goldman Sachs & Co., as underwriters of DoubleClick's IPO.
According to the complaints, the underwriters “solicited and received additional excessive and undisclosed commissions from certain investors in exchange for which it allocated to those investors material portions of the restricted number of DoubleClick shares issued in connection with the offering.”
The complaints allege that with these increased fees, the underwriters received commissions in excess of the 7 percent stipulated in DoubleClick's prospectus.
Goldman Sachs and Merrill Lynch declined to comment on the lawsuits.
DoubleClick spokeswoman Jennifer Blum said the company does not comment on pending litigation. However, in DoubleClick's May 15 quarterly filing with the Securities and Exchange Commission, the company said it plans to fight the lawsuits.
“The lawsuits allege various violations of the securities laws with respect to commissions earned by Goldman Sachs in connection with DoubleClick's initial public offering,” the company said in the filing. “DoubleClick has not yet been served in connection with these lawsuits and these cases are in the early stages. However, DoubleClick intends to dispute these allegations and to defend these lawsuits vigorously.”
On Feb. 20, 1998, DoubleClick announced its IPO of 3.5 million shares of stock at $17 per share. The company's shares rose 57 percent after the IPO was announced and closed on Feb. 20 at $26.75. The complaints allege that investors who purchased shares after the IPO were paying inflated prices because of the preferential treatment the underwriters were giving to its best customers. The increased demand for the shares, the complaints said, drove the stock's market price up.
“Unbeknownst to investors who purchased in the aftermarket, the increase in share price was a result, in part, of the tie-in arrangements, which locked in demand for DoubleClick shares in the aftermarket at levels well above the offering price, thereby unlawfully and deceptively manipulating the market in DoubleClick shares,” one of the lawsuits alleges.
The lawsuits seek unspecified damages and a jury trial.
