-----Original Message-----
From: joe mcverry <[EMAIL PROTECTED]>
To: [EMAIL PROTECTED] <[EMAIL PROTECTED]>
Date: Thursday, August 24, 2000 2:55 PM
Subject: Re: Mercator Stock Price
>Things are looking worse for Mercator. Several class action
>lawsuits just hit the company. For more info on one of them:
>http://biz.yahoo.com/prnews/000824/dc_cmht_me.html
I doubt if any of these lawsuits have any merit
whatever. This is just another manifestation of
a profitable shakedown method developed by
certain unprincipled lawyers.
When a public company suffers a sudden decline in
its stock prices, they file a 'class action suit'
against it, nominally on behalf of the stockholders.
The lawyer who files the suit must have the
endorsement of one member of the affected class.
So these shysters buy one share each of
hundreds of potential target companies in the
names of their secretaries or receptionists.
Once the suit is filed, the plaintiff attorney
also files a sweeping 'discovery' motion,
demanding that the defendant firm turn over tens
of thousands of pages of its internal documents.
Compliance with the discovery demand would cost
the defendant hundreds of thousands or even
millions of dollars. Every page provided must be
vetted by the defendant's own lawyers and
accountants for accuracy and for possible conflict
with confidentiality agreements. And this must be
done before presenting any defense against the
plaintiff's claims. The defendant can ask for
relief from elements of the discovery motion, but
such relief must be requested on an item-by-item
basis, which is just as costly.
Thus, merely by filing such a suit, a plaintiff
lawyer can threaten the target firm with big
legal costs, regardless of the merits of the suit.
Then he offers to settle the suit for less than
the cost of defending it, about $500,000 to
$2,000,000. (Sometimes a judge will dismiss the
suit as frivolous. Then the would-be plaintiff
attorney just writes off his filing fees and
looks for a new victim.)
As plaintiff attorney in a class action suit,
he gets 1/3 of the settlement, a very nice piece
of change. The rest is "distributed to the
shareholders".
Mercator has 28.5 million shares outstanding. A
settlement of $1,000,000 would give the lawyer
$333,000, while the stockholders would get about
2.3 cents per share.
You watch: every one of these suits will be
dismissed or settled for an amount too small
to mean anything to the shareholders.
I'm sorry to have ranted at such length about
something which is somewhat off topic for the
list - but as IT professionals, we can all be
affected by this racket and should be aware of it.
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