Twitter Up Against $124 million Lawsuit

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On Wednesday, social media giant Twitter was sued by two different companies claiming that it stirred up investor enthusiasm for a public offering, then abruptly cancelled. The lawsuit was filed in U.S. District Court in Manhattan by Precedo Capital Group Inc and Continental Advisors SA. The two plaintiffs claimed that the company used the cancelled sale to gain higher market value and IPO price.

The lawsuit 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.”

Twitter spokesman Jim Prosser responded by saying that the company never had a relationship with the two financial firms, who are seeking $24.2 million in compensatory damages and $100 million in punitive damages. Precedo and Continental claimed that once they gathered up commitments for the first $50 million block of shares, at $19 a share (above the $17 being offered in other market transactions) Twitter cancelled the sale.

“Twitter’s intention was to induce Precedo Capital and Continental Advisors to create an artificial private market wherein Twitter could maintain that a private market existed at or about $19 per share for the Twitter stock” they stated.

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