NEW YORK, May 20, 2004 (PRIMEZONE) -- New York's Appellate Division, First Department has upheld eToys' complaint charging Goldman Sachs with breaches of contract, fiduciary duty and professional malpractice relating to Goldman's role as lead underwriter of eToys' May 20, 1999 Initial Public Offering. The complaint alleges that on Goldman's recommendation the IPO was priced at $20 per share. On the first day of trading 13 million shares changed hands with prices reaching over $85 per share. The extraordinary demand for eToys' shares -- and the high price the public was willing to pay for them -- continued for many months after the IPO with approximately 300 million shares trading at prices as high as $86.
It is claimed that Goldman knew that a substantially high price was warranted given the tremendous demand for the stock and existing market conditions but underpriced the shares to benefit its select customers from whom they expected, in return, investment banking business, brokerage commissions and other benefits. The case is now being prepared for trial.
eToys is represented by Stanley Grossman of Pomerantz Haudek Block Grossman & Gross LLP and William Wachtel of Wachtel & Masyr. Special bankruptcy counsel to plaintiff is Traub, Bonacquist & Fox.