As it turns out, 2 Ford Motor Company stockholders and their lawyers have filed a "Notice of Pendency of Derivative Action.....Settlement Hearing and Right to Appear" in the court of chancery of the state of delaware in and for new castle county....because (and I paraphrase from here on in non-legal terms) that Mr. Ford got 400,000 shares of IPO stock in Goldman Sachs Group (today valued around $102.00 per share, totaling by my calculation $40,800,000 in Mr. Ford's personal favor. The suing shareholders think that money should go into Ford Company treasury, not Mr. Ford's wallet. There are other people and groups named in the notice of pendency...Hearing to be held January 24, 2005 at 10:30am at the court of chancery courthouse, 34 the circle, Georgetown, Delaware "the settlement hearing"......... Yours truly, Dumplin'
Goldman Sachs is a major investment banking firm that operates across the world. It is headquartered in New York, where it has been operating since 1869. Goldman Sachs has performed investment banking for such clients as Enron, Ford Motors, Tyco and WorldCom. It was divulged through recent investigations that the executives of these companies, Kenneth Lay, William Ford, Dennis Kozlowski, and John Sidgmore, respectively, received IPO shares from Goldman Sachs. The firm is suspected of having offered these and other investment banking clients large portions of IPO shares in return for their continued business.
IPOs frequently generate large sums of money in short periods of time. When a company begins to trade publicly it issues its first shares through an underwriting firm. The firm (or firms, if more than one is underwriting the opening) will, in exchange for banking fees, evaluate what price the shares should initially be offered at, and how many shares should be sold. It will then sell them to investors. The opening company is guaranteed a specific sum of money from the firm (or firms) that underwrite its opening. Underwriting firms assume the risk in an IPO. When a firm holds IPO shares it may offer them to its clients before public trading commences.
In a process called 'laddering,' IPO shares are offered to particular clients by underwriting firms under the understanding that they will purchase more shares at a specified price after the opening company begins publicly trading. These 'particular clients' are frequently executives of companies that the underwriting firm does banking business with (and wishes to do further business with). The practice of laddering tricks the market. Investors observe that an IPO stock's prices are rising and join in the trading, assuming the shares are moving at an honest rate. Laddering artificially balloons the value of a stock, making it appear to be a hot pick before investors. After the IPO stock's value rises, the client-investors often sell their shares and make huge profits. Those who are not client-investors of the underwriting firms, and thus not aware that the value of the stock has been inflated, fail to sell, and end up holding highly overpriced shares....."