Twitter Sued for $124m over 'Fraudulent' Private Stock Sale [VIDEO]
Two companies have sued Twitter for $124m after claiming that the social media giant fraudulently asked them to organise a private sale of its shares to bolster investor interest for an initial public offering but then cancelled it.
According to the lawsuit filed in the US District Court in Manhattan, Precedo Capital Group and Continental Advisors claimed that Twitter's requests were aimed at artificially giving the loss-making microblogging site a $10.9bn (£6.8bn, €8bn) market valuation.
"Twitter never intended to complete the offering on behalf of Twitter stockholders, in the private market, thereby causing substantial damages to the plaintiffs in the loss of commissions, fees and expenses, as well as through their business reputation," said court filings.
Twitter was founded in early 2006 and has 230 million active users, creating over 500 million tweets a day. The company has set a modest range for its initial public offering, which values the social media giant at $10.9bn.
According to a regulatory filing, the micro-blogging website unveiled the price range at $17 to $20 per share and said it could raise as much as $1.6bn in the process.
The $124m total consists of $24.2m in compensatory damages for the financial firms and $100m in punitive damages and other remedies.
Despite the lawsuit, Twitter representatives said in a statement that the company had never had a relationship with Precedo or Continental Advisors.
"Their claim is completely without merit," Jim Prosser, a spokesman for Twitter, said in a statement.
The financial firms said "Twitter's intention was to induce Precedo Capital and Continental Advisors to create an artificial private market wherein Twitter could maintain that a private market existed at or about $19 per share for the Twitter stock."
The case is Precedo Capital Group Inc. v. Twitter Inc, U.S. District Court, Southern District of New York, No. 13-07678.
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