Twitter Lawsuit Alleges Fraud; Damages Set at $124M
Twitter Inc. (NYSE:TWTR) is generating tweet-worthy buzz ahead of its highly anticipated initial public offering, but it isn’t the kind of attention the company hoped for. Precedo Capital Group LLC and Continental Advisors SA are suing Twitter, alleging the social media company fraudulently used a proposed sale of shares to set its $10 billion valuation. Precedo Capital is a global asset manager based in Scottsdale, Arizona; Continental Advisors is a consultancy and advisory group based in Luxembourg. The companies are seeking $124 million in damages.
In a 22-page filing, the companies claim that “Twitter never intended to complete the private sale of Twitter stock,” according to a Bloomberg report. Instead, “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.”
Forbes delves further into the filing and how the sale never came to be. First, in 2012, Twitter contacted GSV Asset Management, which is a Twitter shareholder. Twitter told GSV it intended to sell shares through advisory companies or accredited investors.
In preparation for the sale, Precedo and Continental claim to have conducted 47 presentations in eight countries within a timeframe of 18 days. Non-public information had been provided by Twitter in order to inform potential buyers, and $278 million worth of stock in Twitter was ready to be sold, the companies claim, when Twitter extinguished the sale. GSV Asset Management was not named in the complaint.
The New York Times contacted Continental Advisors managing partner Andreea Porcelli, who said Continental had ”been trying to contact Twitter for quite a while” and that “[t]his is our last stand.” The newspaper printed a statement by Twitter regarding the matter, in which the social media site said: “We’ve never had a relationship with these plaintiffs. Their claim is completely without merit.”
On October 22, Twitter updated its Securities and Exchange Commission filing, placing value per share between $17 and $20. The case has been filed in the U.S. District Court of the Southern District of New York and is called Precedo Capital Group Inc. v. Twitter Inc.