LAaard public offering accused of causing investor losses

["Miklos A. Vasarhelyi" <miklosv@andromeda.rutgers.edu>]

Lazard accused of causing investor losses
>By James Politi in New York
>Published: June 16 2005 23:54 | Last updated: June 16 2005 23:54
>> 

Lazard was on Thursday accused of conspiring with Goldman Sachs to price
its initial public offering higher than it should have, causing investors
to lose millions of dollars when the shares fell in the wake of the
listing.

Class-action lawyers at Lerach Coughlin, which this week agreed to settle
a suit against JPMorgan Chase over its role in the Enron collapse for
$2.2bn, made the claim against Lazard in a filing in federal court in
Manhattan.

The suit marks a setback for Bruce Wasserstein, the chief executive of
Lazard, in a week of positive news: the investment bank on Wednesday
reported better-than-expected first quarter earnings boosted by a strong
performance in its mergers and acquisitions advisory business.

In the complaint, Lerach alleges that Lazard failed to disclose that the
level of demand for the IPO meant the shares should have been sold for
$22 each instead of $25 each. The suit also claims that Lazard did not
say that Gerardo Braggiotti, one of its top European dealmakers, was
likely to leave the firm because of his opposition to Mr Wasserstein's
plans. It adds that Goldman manufactured the appearance that the IPO was
fairly priced by arranging to buy back shares that it sold to hedge funds
immediately after the listing.

Lazard did not return a call seeking comment. Goldman, the investment
bank that underwrote the IPO and was named as a defendant in the suit,
declined to comment.

The complaint implies that Lazard needed to price the offering at $25 in
order to raise enough money to buy out the bank's former chairman, Michel
David-Weill, and other investors, for the fixed sum of $1.6bn. The
suggestion is that if the deal had been priced lower, the buy-out might
not have succeeded.

Lazard listed on the New York Stock Exchange in early May after 157 years
as a private partnership. But the company's shares fell from $25 - where
the listing was priced - to below $21 in the first weeks of trading,
causing investors to book significant losses. By Thursday, however, the
share price had bounced back to $24.24, mainly thanks to its announcement
of better-than-expected net income of $31.3m in the first
quarter.

Miklos A. Vasarhelyi
KPMG Professor of AIS
Director RARC / CARLAB
Rutgers University
315 Ackerson Hall
180 University Avenue
Newark, NJ 07102
(973) 353 5002
(201) 454 4377 (cell)
http://raw.rutgers.edu/mik los