Pre-IPO fraud lawsuit dismissed, Twitter gets final laugh
Two financial firms have alleged that Twitter committed a pre-IPO fraud. However, the microblogging site has taken home the victory after the court said that the firms failed to provide substantial proof regarding their claim. The firms claimed that Twitter plotted a scheme aiming to fuel interest during its public debut. They also added that a private stock sale was fraudulently planned without any intentions to actually hold a sale.
However, US District Judge Shira Scheindlin said that the firms, named Precedo Capital Group Inc and Continental Advisors SA, have failed to prove that Twitter was indeed responsible for the cancellation of the sale offered through another company, GSV Asset Management Inc. The latter was not named as the defendant in the case.
The lawsuit filed a week prior to the Twitter IPO was valued a hefty $124 million. The suit accused GSV to have fraudulently arranged an offering that was designed to collapse for the social media platform to raise more money as it trades on the NYSE. This would have helped Twitter to justify its company valuation of $10 billion that has been previously announced.
The case was dropped off with prejudice which means it cannot be filed again.