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Two Financial Firms Make Sketchy Suit Against Twitter
It’s debatable whether the two financial firms that sued Twitter Wednesday should be taken seriously. They are seeking $124 million in damages, and $100 in punitive damages, for what they claim was Twitter’s scheme to artificially bolster their IPO, intended to go public before Thanksgiving, by setting the two firms, Precedo Capital Group Inc. and Continental Advisers, on a roadshow to sell their stock, only to deny it after the tour was done.
Twitter plans to sell 70 million shares of their stock at $17 to $20 per share, bringing Twitter’s overall value to be about $12.5 billion.
The two financial companies toured various countries in three continents in 2012, getting individuals interested in buying $278 million in Twitter shares.
“The public will now be purchasing shares at an inflated price, based upon Twitter’s pre-IPO fraudulent misrepresentations,” claimed their lawsuit.
“Twitter never intended to complete the private sale of Twitter stock,” said the lawsuit. “Twitter’s intention was to induce Precedo Capital and Continental Advisors to create an artificial private market wherein Twitter could maintain that a private market existed at or about $19 per share for the Twitter stock.”
Twitter, for their part, said flat out, “We’ve never had a relationship with these plaintiffs. Their claim is completely without merit.”
It’s a sentiment that David Peirez, a partner at Riesman, Peirez, Reisman & Copabianco, shared, as reported in Bloomberg Businessweek, when he called the lawsuit, “sour grapes by two companies.”
“It appears that the plaintiffs now see a pot of gold in the upcoming very hot IPO. This has all the markings of a hold up.”