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Startups Cry “Underpricing”, Respond to Lawsuits By Suing Underwriters
New York, March 28 – Creditors of bankrupt Mortgage.com accused Credit Suisse First Boston of charging too little for its IPO shares today, starting what many believe will be a minor cavalcade of buck-passing lawsuits from busted dot-coms facing lawsuits of their own.
In its suit, Mortgage.com claimed that it and other Internet start-ups were "deprived of millions of dollars in IPO proceeds to which they were lawfully entitled.'' The suit seeks class action status, involving other firms taken public by Credit Suisse. The bank denied the allegations.
Attorney Jack Auspitz, represents 300 companies including Razorfish Inc., Red Hat Inc. and DoubleClick Inc. in the investor suits, and claims to be in discussions about taking possible action against underwriters.
So far, no additional suits alleging that investment banks underpriced IPO shares have been filed, and it's not certain that any will be. If new suits are filed, underwriters may have to defend against allegations that they cost companies millions by setting IPO prices too low.
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