Twitter IPO marred by lawsuit
Two financial firms allege fraudulent scheme to inflate initial share price
Wall Street's newest star Twitter found itself in the headlines for the wrong reasons yesterday as a $124m lawsuit threatened to taint the microblogging company's hotly anticipated IPO.
Financial firms Precedo Capital Group Inc and Continental Advisors SA allege that Twitter engaged them in a fraudulent scheme to artificially inflate investor interest in its flotation through a private sale of its shares and then cancelled the transaction, according to a report by Reuters.
In an action brought in the US District Court in Manhattan, the claimants are seeking $24.2m in compensation, $100m in punitive damages, arguing that the aborted sale allowed loss-making Twitter to reach a $10bn market valuation and increase its initial share price.
"Twitter never intended to complete the offering on behalf of Twitter stockholders, in the private market, thereby causing substantial damages to the plaintiffs in the loss of commissions, fees and expenses, as well as through their business reputation," the filing read.
Twitter denied having any relationship with either plaintiff. "Their claim is completely without merit," a spokesman claimed.
San Francisco-based Twitter last week announced a share price of between $17 and $20, and a company value of $11bn. Although no date has been officially set for the commencement of trading, market commentators suggest it could occur as early as next week.