Beatie and Osborn LLP Announces eToys Inc. Shareholders File Class Action
NEW YORK, July 5 -- A class action lawsuit was filed in the
U.S. District Court for the Southern District of New York on behalf of all
shareholders who purchased the common stock of eToys, Inc.
(formerly listed as Nasdaq: ETYS) between May 19, 1999 and May 26, 2000,
inclusive.
The named plaintiff alleges that eToys, Edward C. Lenk, its President and
Chief Executive Officer at the time of its Initial Public Offering, and Steven
J. Schoch, its Chief Financial Officer at the time of the offering, violated
the federal securities laws by issuing and selling eToys common stock during
the offering without disclosing to investors that three of the lead
underwriters, The Goldman Sachs Group, Inc., FleetBoston Robertson Stephens,
Inc., and Merrill Lynch, Pierce, Fenner & Smith Inc. had solicited and
received excessive and undisclosed commissions from certain investors.
The complaint alleges that in exchange for "kickbacks" in the form of
excessive commissions, the three lead underwriters allocated eToys shares to
their customers at the initial public offering price of $20.00 per share. To
receive the allocations, the customers had to agree to purchase additional
shares in the aftermarket at progressively higher prices (a practice known on
Wall Street as "laddering"). This was intended to (and did) drive eToys`
share price to artificially high levels. This practice enabled both the
underwriters and their customers to reap enormous profits by buying eToys
stock at the $20.00 offering price and reselling the stock to the public
shareholders for prices as high as $85.00 per share. The customers were
required to "kick back" some of the profits earned from this scheme in the
form of secret commissions. These secret commission payments were sometimes
calculated after the fact based on how much profit each investor had made from
his or her initial public offering stock allocation.
The complaint further alleges that defendants violated the Securities Act
of 1933 because the Prospectus distributed to investors and the Registration
Statement filed with the Securities and Exchange Commission in order to gain
regulatory approval for the eToys offering, contained material misstatements
regarding the commissions that the underwriters would derive and failed to
disclose the additional commissions the underwriters earned from the
"laddering" scheme.
If you are a member of the class described above, you may, no later than
August 27, 2001, seek to participate in this action as a lead plaintiff. If
you have any questions, wish to discuss this matter, or would like to receive
a copy of the complaint and the documents necessary to participate as a lead
plaintiff, you may contact:
Eduard Korsinsky, Esq.
Ben Coleman, Legal Assistant
Beatie and Osborn LLP
521 Fifth Avenue, 34th Floor
New York, New York 10175
Toll Free No.: 800-891-6305
Tel. No.: 212-888-9000
Fax No.: 212-888-9664
E-mail: clientrelations@bandolaw.com
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