Social media posts made in haste have proved to be career-enders or at least job-enders for people in the digital age. Fireme! promises to help workers avoid the pitfalls of passive aggressive tweets. (Photo by Oli Scarff/Getty Images)
Hide Caption

Twitter accused of ruse to pump up share price

a a a a
Share this story

NEW YORK (AP) -- Two financial firms sued Twitter on Wednesday, saying it supported their own world tour to sell its shares last year, only to disallow the sales in a ruse aimed at boosting the company's valuation above $10 billion for an initial public offering.

Precedo Capital Group Inc., based in Scottsdale, Ariz., and Continental Advisors, based in Luxembourg, sought $124 million in damages, including $100 million in punitive damages, for misrepresentations that it said were "wanton and egregious."

Expected to go public before Thanksgiving, Twitter's plan to sell 70 million shares will be the biggest technology IPO since Facebook went public last year. In a regulatory filing last week, Twitter set a price range of $17 to $20 per share for its offering. At the $20 share price, Twitter would be valued at about $12.5 billion.

The two financial companies said they took the roadshow through several countries and three continents in September 2012, lining up institutional funds, asset managers and high net worth individuals to buy $278 million in Twitter shares.

The lawsuit accused San Francisco-based Twitter of seeking an artificial market to ensure at least a $19-per-share price, injuring the public because the initial offering price for its shares will not be based on price-to-earnings ratio and balance sheet valuations.

"The public will now be purchasing shares at an inflated price, based upon Twitter's pre-IPO fraudulent misrepresentations," the lawsuit said.

In a statement, Twitter Inc. said: "We've never had a relationship with these plaintiffs. Their claim is completely without merit."

The lawsuit said the financial firms took to the road looking for investors after a Twitter shareholder, GSV Asset Management Inc., claimed in March 2012 that it had negotiated a deal with Twitter to sell $50 million to $278 million worth of Twitter stock owned by employees, contractors and other stockholders. GSV Asset was not named as a defendant in the lawsuit.

In the 18-day international roadshow, 47 presentations were made in eight countries by GSV Asset and Continental Advisors while Precedo Capital made presentations to investors and 10 broker dealers in New York, Chicago, Florida, Virginia and Pennsylvania, the lawsuit said. It said GSV Asset provided information at the roadshows including non-public information that came from Twitter.

After obtaining more than $50 million in commitments at $19 per share, Twitter blocked the sale nine days after the roadshow ended, causing the plaintiffs to lose millions of dollars in commissions, fees and expenses, besides damage to their reputations, the lawsuit said.

The firms said they were told that Twitter wanted to avoid a pitfall of Menlo Park, Calif.-based Facebook Inc.'s initial public offering last year by removing an overhang of Twitter shares. They said they believed Twitter wanted to see if U.S. and international buyers would support a $19 share price in what amounted to a de facto public offering.

"Twitter never intended to complete the private sale of Twitter stock," the lawsuit said. "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."

David Peirez, a partner at the Long Island-based law firm Reisman, Peirez, Reisman & Copabianco who specializes in business and transactional law, called the lawsuit the result of "sour grapes by two companies."

"It appears that the plaintiffs now see a pot of gold in the upcoming very hot IPO," he said. "This has all the markings of a holdup."

---

AP Technology Writer Barbara Ortutay contributed to this report.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Print this article

Comments

Hmm... It looks like you’re not a WCPO Insider. or Subscribe now to contribute!

More Technology News
Scammers using Netflix to steal from millions
Scammers using Netflix to steal from millions

A dangerous new phishing scam is targeting the sensitive information of millions of Netflix users.

No geeks here: Tri-Staters flock to learn coding
No geeks here: Tri-Staters flock to learn coding

If the first thing that comes to mind when thinking of a computer programmer is someone sitting alone in a room, pounding away at a keyboard…

Apps to know and reporter woes in digital review
Apps to know and reporter woes in digital review

Each week, we recap the stories and trends that made headlines in the digital world. Read on to see what you missed.  

Reaching out to communities in different ways
Reaching out to communities in different ways

This week one project looks to double funds for a local hip hop and youth arts center. The second seeks help to expand a café that the…

Sony recalls some laptops over battery issue
Sony recalls some laptops over battery issue

Sony is recalling some of its VAIO laptop computers, saying that it's possible that its non-removable battery pack could overheat.

GOP, Dems clash over online domain names
GOP, Dems clash over online domain names

Republican opposition to Obama administration plans to spin off U.S. oversight of the Internet's domain name system is evolving into an…

Heartbleed: Which websites have security bug?
Heartbleed: Which websites have security bug?

One of the biggest encryption flaws the Internet has ever endured has potentially affected thousands of websites.

What you need to know about the Heartbleed bug
What you need to know about the Heartbleed bug

Millions of passwords, credit card numbers and other personal information may be at risk as a result of a major breakdown in Internet…

'Heartbleed' flaw exposes millions of passwords
'Heartbleed' flaw exposes millions of passwords

An alarming lapse in Internet security has exposed millions of passwords, credit card numbers and other sensitive bits of information to…

8 apps parents should watch for
8 apps parents should watch for

Is it really a friend or is it a predator? Unless you are actively monitoring your child's smartphone and tablet apps, you are not…