Stull, Stull & Brody Announces Class Action Lawsuit Against Autoweb.com, Inc.
Business Editors & Legal Writers
NEW YORK--(BUSINESS WIRE)--May 31, 2001
The following is an announcement by Stull, Stull & Brody:
Notice is hereby given that a class action lawsuit was filed on May 31, 2001, in the United States District Court for the Southern District of New York, on behalf of purchasers of Autoweb.com, Inc. ("Autoweb.com") (NASDAQ:AWEB) common stock between March 23, 1999 and April 18, 2001 (the "Class Period").
The complaint alleges that defendants Autoweb.com, Inc., Dean A. DeBiase, Farhang Zamani, Payam Zamani, Mark N. Diker, Jay C. Hoag, Mark R. Ross and Peter S. Sealey violated the federal securities laws by issuing and selling Autoweb.com common stock pursuant to the IPO without disclosing to investors that some of the underwriters in the offering, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors.
The complaint alleges that, in exchange for the excessive commissions, lead underwriters Credit Suisse First Boston Corporation and BancBoston Robertson Stephens, Inc., together with underwriters Morgan Stanley Dean Witter & Co., Incorporated and Salomon Smith Barney, Inc. allocated Autoweb.com shares to customers at the IPO price of $14.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $14.00, 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 Autoweb.com stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive Autoweb.com'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 $14.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $41.00 during its first day of trading.
Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the underwriters required their 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 his or her IPO stock allocation.
