As Twitter thrusts itself into the spotlight with a public offering, the company is finding its considerable assets have attracted a new type of audience: litigious parties looking for a piece of the action.
Wednesday, Precedo Capital Group and Continental Advisors filed suit against the social network for fraud, alleging that Twitter manipulated the firms to "fix" an advantageous market value ahead of its IPO. The firms argue that Twitter blocked a carefully orchestrated stock sale -- up to $278 million worth of Twitter stock -- that cost them millions in expenses. Not pleased with the results of the failed sale, Precedo and Continental are seeking $124.2 million in damanges.
"This private market transaction, which upon information and belief was interrupted by Twitter, permitted Twitter to establish a sales price floor for a large amount of Twitter stock among multiple buyers, as well as a $10 billion market value for Twitter," the suit alleges.
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"We've never had a relationship with these plaintiffs. Their claim is completely without merit," Jim Prosser, a Twitter spokesperson, told CNET.
In the suit, the plaintiffs, however, acknowledged that they worked primarily with intermediatary GSV Asset, which buys up shares from employees of private companies and was operating a Twitter-approved investment vehicle. Twitter, according to Precedo and Continental, worked with GSV to dupe them into believing shares were actually for sale.
"It was Twitter's purpose to fix a private market floor price through the accredited investors that plaintiffs would obtain," according to the suit. "Twitter's misrepresentations to both plaintiffs were so wanton and egregious that punitive damages are warranted. Twitter never intended to complete the offering on behalf of Twitter stockholders."
Meritless or not, the suit could sully Twitter's reputation ahead of its public offering, which is scheduled for next week. Twitter plans to sell as many as 80.5 million shares at up to $20 a piece, meaning it would make up to $1.61 billion in proceeds.