After almost eight years of litigation, years of mediation, and failed partial settlements, the coordinated cases captioned as In re Initial Public Offering Securities Litigation (21-MC-92) appear to be on track for a global settlement. According to the settlement stipulation (click here to read it), the aggregate gross amount of the settlement is $586 million, which includes the plaintiffs’ attorneys’ fees and notice and administrative expenses. The settlement is subject to court approval. The publicly available version of the settlement stipulation does not detail what percentage of the settlement is allocated to each of the hundreds of defendants (the companies that went public through initial public offerings and underwriters of the IPOs at issue).
Over 1000 securities class actions were filed during 2001 and 2002 in the U.S. District Court for the Southern District of New York involving the allocation of securities in certain IPOs. The defendants consist of the companies brought public, certain of their officers and directors and 55 of the investment banks that brought them public and underwrote various follow-on offerings. The lawsuits allege that the IPOs were manipulated by the investment banks to artificially inflate the market price of those securities and to conceal the amounts of compensation actually received by the underwriters. Beginning on April 19, 2002, the plaintiffs in these litigations filed amended complaints by virtue of which the public offerings of each of the 309 issuers became the subjects of separate complaints.
Although this settlement ranks as one the top twenty securities class action settlements of all time, the settlement pales in comparison of what the plaintiffs expected only a few years ago. The issuer defendants previously agreed to guarantee at least a $1 billion settlement, and it was expected that the underwriter defendants would settle for multiples of this amount. In fact, JP Morgan Chase alone (one of the fifty-five underwriter defendants) preliminarily agreed to pay $425 million for its share of the IPO litigation alone. These settlements were terminated after the Second Circuit remanded the district court's granting of the plaintiffs' motion for class certification. The plaintiffs subsequently filed amended complaints and filed a renewed motion for class certification for a more limited class, taking into account the conclusions of the Second Circuit.
We will keep to provide updates and this settlement moves through the court approval process