After finally settling lawsuits accusing insiders of dumping stocks following an undisclosed auditor’s warning, drkoop.com has found itself embroiled in one of the many IPO-allocation lawsuits sweeping Wall Street.
The struggling Santa Monica-based company, its namesake chairman and the underwriters of its 1999 IPO were named defendants earlier this month in a suit filed days after the company reached a tentative $4.25 million settlement in a series of unrelated class-action lawsuits filed last year.
The new suit is among scores filed in the past few months, largely against Internet and other high-tech firms that went public during the IPO-mania of the late 1990s, that accuses securities firms of charging excessive commissions in exchange for highly sought-after share allocations.
Goto.com Inc., NetZero Inc., Stamps.com Inc., THQ Inc. and the defunct eToys Inc. are among the other Los Angeles-area companies that have been named in similar suits over the past few months.
In the case of drkoop.com, the company sold 10.7 million shares at an initial offering price of $9 per share in June 1999, with the stock rising as high as $20.25 on the first day of trading. Shares climbed to $45.75 on July 6, 1999, according to the lawsuit. However, like many dot-coms it has struggled, and it was trading last week at less than 15 cents a share.
Chris Petrovic, the company’s vice president of business and legal affairs, said the timing was poor, since the company had just extricated itself from a series of class action lawsuits alleging that company insiders, including then-chief executive Donald Hackett and current chairman Dr. C. Everett Koop, sold 400,000 shares for more than $4.5 million following an auditor’s warning in February 2000 that the company may not be able to sustain itself as a going concern.
Still, he dismissed the action, which also names Bear Stearns & Co. Inc. and Hambrecht & Quist LLC, the underwriters.
“This lawsuit is a dime a dozen. There have been hundreds filed of late,” he said. “We are of the understanding this is really an effort to go after the underwriters who participated in these arrangements.”
