| NEW YORK, April 21
NEW YORK, April 21 Twitter Inc has won
the dismissal of an unusual lawsuit accusing the social media
company of fraudulently arranging a private stock sale it never
intended to complete, with a goal of stoking interest in its
November 2013 initial public offering.
U.S. District Judge Shira Scheindlin in Manhattan said
Precedo Capital Group Inc and Continental Advisors SA failed to
show that Twitter was responsible for the cancellation of a
secondary market offering they had been arranging with another
firm, GSV Asset Management Inc.
Filed one week before Twitter went public, the $124 million
lawsuit accused the company of using GSV as its agent to arrange
the aborted offering as a means to raise more money in its
eagerly awaited IPO and justify a $10 billion market valuation.
Noting the plaintiffs dealt directly with GSV and never with
Twitter, however, Scheindlin said the complaint "does not
plausibly allege that Twitter granted GSV Asset express
authority to act as its agent for any purpose.
"Moreover," she added, "the complaint does not allege that
Twitter secretly limited that authority contrary to the standard
practice in the securities industry."
Scheindlin dismissed the case with prejudice, meaning it
cannot be brought again.
Joseph Baratta, a partner at Baratta, Baratta & Aidala
representing the plaintiffs, did not immediately respond to
requests for comment.
Twitter did not immediately respond to similar requests. The
San Francisco-based company has said the lawsuit lacked merit.
The lawsuit claimed Twitter had been seeking to avoid
repeating problems that afflicted Facebook Inc's 2012
IPO, and sidestep the potential for an excess supply of its
shares by controlling transactions in the private market.
Precedo, a broker dealer licensed in Arizona, and
Continental, a Luxembourg financial adviser, claimed GSV offered
to provide up to $278 million of Twitter shares that they could
market to other investors.
But they said that, after the marketing process began,
Twitter caused GSV to cancel the offering on Oct. 5, 2013, upon
learning that investors were willing to pay $19 per share, above
the $17 or less offered in other private transactions.
The firms said Twitter cost them fees and reputational
damage and sought $24.2 million of compensatory damages plus
$100 million of punitive damages. GSV was not a defendant.
Twitter priced its IPO at $26 per share on Nov. 6, 2013,
then valuing the company at $14.1 billion.
Twitter shares were up $1.10, or 2.4 percent, at $46.11 in
Monday afternoon trading on the New York Stock Exchange.
The case is Precedo Capital Group Inc v. Twitter Inc, U.S.
District Court, Southern District of New York, No. 13-07678.
(Reporting by Jonathan Stempel in New York. Editing by Andre