| WILMINGTON, Del., Sept 19
WILMINGTON, Del., Sept 19 Litigation over
Goldman Sachs Group Inc's role in the spectacular rise
and fall of eToys Inc finally ended on Thursday with court
approval of a $7.5 million settlement.
The online toy seller's IPO in 1999 became a poster child
for the excesses of the dot-com bubble. The stock quadrupled
when it began trading, but two years later the company was in
The case was brought by creditors of eToys, who alleged that
Goldman Sachs underpriced the stock to ensure a huge pop in
price on the first day of trading.
The litigation slowly worked through multiple appeals in New
York state courts but never went to trial. The two sides struck
a settlement earlier this year, on the eve of arguments in New
York's Court of Appeals to overturn a dismissal of the case.
On Thursday, U.S. Bankruptcy Judge Mary Walrath, who is
overseeing the company's Chapter 11 case in Wilmington,
Delaware, approved the agreement, calling it a good result for
She refused to seal the terms of the deal, as Goldman Sachs
had sought. The investment bank claimed the settlement contained
information that could be misused if made public.
The U.S. Trustee, the part of the Department of Justice that
oversees bankruptcy cases, objected. "It's not the secret
formula for Coca-Cola," Mark Kenney, a lawyer for the U.S.
Trustee, said in court on Thursday.
While Waltrath ruled that the settlement would be made
public, the terms of the deal were not immediately available.
Lawyers taking part in a later hearing over fees in the case
said the settlement was $7.5 million.
The IPO OF eToys, at the time, was the fifth-biggest debut
in history, giving a start-up with just $35 million in revenue a
bigger market capitalization than Toys 'R' Us, which at the time
had $11 billion in sales.
Creditors alleged the IPO enriched favored clients of the
investment bank who had access to the stock at the IPO price of
$20 per share.
Had the IPO been priced more closely to the $75 per share
where it traded on the first day, eToys would have raised
hundreds of millions of dollars more than it did, the creditors
argued. Starved of capital, the company filed for bankruptcy
when it was unable to build the warehouses needed to meet
growing customer demand.