May 17, 2001 3:45 PM PDT

DoubleClick slammed with shareholder suits

Three class-action lawsuits were filed this week against Net advertising company DoubleClick, alleging that executives and underwriters violated federal securities laws in connection with the company's initial public offering.

The lawsuits, filed in the U.S. District Court of the Southern District of New York, allege that documents filed with the Securities and Exchange Commission and the company's prospectus contained misrepresentations and omissions that resulted in inflated commissions paid to the company's underwriters at shareholders' expense.

The suits name DoubleClick, four company executives including CEO Kevin Ryan and company co-founder Kevin O'Connor, and underwriters Goldman Sachs and Merrill Lynch.

Other Internet companies have been targets of similar complaints. Car Web site AutoWeb.com, digital watermarking technology company Digimarc and interactive TV company Liberate Technologies are just a handful of tech companies facing comparable grievances.

In the DoubleClick cases, shareholder Barbara Eiseman and an unnamed number of shareholders filed the class-action lawsuits, which seek unspecified damages and a trial by jury. The case could amass thousands of potential plaintiffs who purchased DoubleClick shares between Feb. 20, 1998, and Dec. 6, 2000, according to plaintiffs' attorneys.

A DoubleClick representative said the company would not comment on pending litigation. However, in a recent quarterly filing, the company acknowledged the lawsuits, saying it intended "to dispute these allegations and defend these lawsuits vigorously."

The lawsuits charge that DoubleClick executives were responsible for "false and misleading" statements made in the company's prospectus filed Feb. 20, 1998, which outlined the company's intentions to sell 3.5 million shares at $17 each to the public. In addition, the suit alleges that DoubleClick's underwriters gave preferential treatment to particular institutional customers at the expense of the general public.

"Unbeknownst to investors, and contrary to the representations on the cover page of the prospectus...the underwriters solicited and received additional excessive and undisclosed commissions from certain investors in exchange for which it allocated to those investors material portions of the restricted number of DoubleClick shares issued in connection with the offering," according to the lawsuit.

The commissions paid to Goldman Sachs and Merrill Lynch as a result would have been more than the 7 percent reported in the prospectus, according to the complaint.

In addition, the plaintiffs charge that DoubleClick's underwriters agreed to allocate shares to certain customers in exchange for customers' promises to buy additional shares in the aftermarket at predetermined prices.

"Such tie-in arrangements were designed to and did maintain, distort and/or inflate the market price for DoubleClick shares in the aftermarket...and an undisclosed benefit to the (defendants) with respect to the additional shares that they had an option to purchase," according to the suit.

DoubleClick shares rose 57 percent to $26.75 on their first day of trading, Feb. 20, 1998. The suit alleges that the increase in share price was partly the result of such tie-in agreements. The stock currently trades around $13.

Goldman Sachs and Merrill Lynch would not comment on the lawsuits.

 

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