Twitter sued for $124 million in Manhattan lawsuit
Twitter sued for $124 million
Continental Advisors SA and Precedo Capital Group Inc have accused Twitter of arranging then aborting the private sale of some Twitter shares, in order to gain a higher valuation ahead of their upcoming IPO on the New York Stock Exchange.
The lawsuit was filed in US District Court in Manhattan on Wednesday and it stated: “Twitter never intended to complete the offering on behalf of Twitter stockholders, in the private market, thereby causing substantial damages to the plaintiffs in the loss of commissions, fees and expenses, as well as through their business reputation.”
A statement issued by Twitter spokesman Jim Prosser, however, insists: “Their claim is completely without merit.” Prosser went as far as to say that Twitter had never had business connections with either Continental Advisors or Precedo.
Twitter’s proposed IPO of $1.6 billion (£1 billion) worth of shares early next month is said to be extremely modest and conservative in comparison to Facebook’s IPO on the Nasdaq stock market in 2012, when they issued $16 billion worth of shares.
However, Twitter has been valued at almost ten times less than Facebook at $11 billion. The latter was valued at $100 billion around the time of its IPO (which proved infamously problematic) in May last year.
Companies claim Twitter never intended to sell stock privately
Continental Advisors and Precedo accuse GSV Asset Management – an approved buyer of Twitter stock – of working with Twitter to swindle them into believing the shares were for sale. They say GSV agreed to orchestrate the sale of around $278 million of Twitter shares owned by employees.
The lawsuit states: “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.”
Could this scupper the success of Twitter’s IPO?
Kleon West, business development director at theEword, says: “It will remain to be seen whether or not this lawsuit and the bad publicity it brings will make Twitter’s impending IPO run less smoothly. So far, however, it seems much better-planned than Facebook’s disastrous IPO in May last year.”