A lucky guy from one of Changyou's products
We’ve written a few posts recently about the dismal state of the IPO market. Finally, we have some good news to report.
Online game developer Changyou.com priced on Thursday at $16 and traded up as high as $23.93 before closing at $20.02 – a 25% gain for the day. The $60 million IPO was just the second of the year, after Bristol-Myers Squibb‘s spinoff IPO of Mead Johnson Nutrition in January.
Today, the parties to the long-running “In Re IPO Securities Litigation” reached a $586 million settlement. By long-running, we mean nine years. Bloomberg recaps the action up to today:
In the IPO frenzy of the late 1990s, banks raised about $130 billion for companies they brought to market while generating billions in fees. Investors who received IPO shares profited from selling stock as prices soared. Many of those stocks later plummeted and the companies declared bankruptcy.
Investors who bought shares after trading began said the banks had secret arrangements requiring IPO clients to buy more stock later at higher prices. That created artificial demand that drove up prices until they collapsed, investors said. The lawsuits were first filed in 2000. The new filing was submitted April 1 and made public today.
Settlement talks went on for years. The case neared resolution in October for $610 million, then almost collapsed in January, according to people familiar with the negotiations. Banks offered less money because of the Lehman bankruptcy and wanted to retain the right to reclaim any funds that aren’t paid to investors.
The BigLaw involvement and more IPO news after the jump.
BigLaw served its clients well. Mel Weiss reportedly demanded $12 billion to settle several years ago. Instead, Morgan Stanley, Credit Suisse Group, and a list of issuers that reads like a “Who’s Who of Bubble IPOs.” A copy of the 358 page settlement is available courtesy of the WSJ.
Morrison & Foerster’s, Jack Auspitz (Columbia AB ’64, Harvard JD ’68), liaison counsel for the issuer defendants, said “We’re very pleased that the case has been resolved.” Sullivan & Cromwell’s Vince DiBlasi (Yale BA ’75, JD ’78) was liaison counsel for the bank defendants.
Apparently, a solitary IPO in each of two consecutive quarters, plus the settlement news and the market runup, are all it takes to bring the bears out. The WSJ also reports on the low threshhold for optimism:
“Day to day, we certainly engage in more dialogue now about IPOs than in the prior six to nine months, and if there is a leading indicator, that is it,” says Daniel P. Cummings, co-head of equity capital markets in the Americas at Bank of America Merrill Lynch.
Behind the scenes, bankers say they are seeing more interest from companies that want to discuss going public. Previously, the possibility of tapping the public markets seemed much less likely.
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