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Lawsuit: Hedge Funds Helped Lazard Inflate Its IPO Price

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NEW YORK (HedgeWorld)–A plaintiffs’ law firm filed a class action July 15 against Lazard Ltd., various named individuals and Goldman Sachs, claiming that the defendants artificially inflated Lazard’s price at its initial public offering in May 2005 in a scheme said to have involved (unnamed) hedge funds.

The lawsuit, filed in the federal district court for Manhattan, claims that the law firms’ named client, Stanley Sved, and others similarly situated, purchased shares on the open market between May 4 and May 12 and sustained losses as the stock fell in value in subsequent days.

The IPO price was US$25. By May 23 Lazard (NYSE: LAZ) had fallen to below US$21, although it has since regained most of the difference.

Goldman Sachs was Lazard’s lead underwriter. The lawsuit asserts that Bruce Wasserstein, Lazard’s chief executive, “openly pressed Goldman to set the IPO range between ‘$25 and $27 dollars a share.’ However, it was clear to the defendants, all of whom were highly skilled in bringing companies public . . .” that the market wouldn’t support such a price.

To support the inflated IPO price, Goldman made agreements with hedge funds. They would buy millions of shares that they could immediately flip back to Goldman. The alleged agreement also provided that such flipping would not affect the standing of these hedge funds for future IPOs.

Neither Goldman nor Lazard had any comment Monday.

The complaint further alleges that the prospectus contained untrue statements of material fact, omitted the statement of facts with misleading results and concealed still other facts. The defendants owed the purchasers of Lazard shares, the complaint said, a diligent investigation to ensure that such statements were true and not misleading, and failed in that duty.

Contact Bob Keane with questions or comments at: [email protected].


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