Saturday, May 05, 2007

World Online: an old sore of the Internet hype

On Thursday an Amsterdam court ruled in the case of World Online (WOL), a former Dutch ISP. The leading banks in the IPO of WOL, ABN AMRO and Goldman Sachs had mislead the buyers. With this ruling a the road is open to a compensation of 3 billion euro for 150.000 investors.

WOL went to the stock market in 2000 on top or just after the internet hype. On Friday March 17, 2000 WOL was noted on the Stock Exchange for the first time, it was listed for 43 euro. WOL collected up 1,8 billion euro. On the first day the quote went above 50 euro, but the next day the quote dropped and kept dropping. When the press reported that CEO Nina Brink had sold shares before the IPO for 6,04 dollar, many private investors felt fooled. It was the beginning of the end for WOL. On April 13, 2000 Nina Brink was dismissed and WOL was sold to the Italian ISP Tiscali for a fraction (5,5 billion euro in shares) of the estimated value (18 billion euro).

The court says in its ruling that the banks misrepresented information in the bidding document and did not correct the much too optimistic picture WOL drew. In December 2003 the court already ruled that WOL had mislead the buyers with too optimistic press releases and should pay compensation; the company went for another legal battle.

The court case had been brought by the VEB, a Dutch association of investors. Paul de Vries said to be optimistic now about compsenrtaion. He expects to get some hundreds of millions. Compensation will have to be gotten from Tiscali and WOL and it is not unrealistic that they will attempt to get money from former CEO Nina Brink, who had not been crystal clear about the sale of shares before the IPO; she claimed that the shares had been transferred, but no price was mentioned. The court indicated that officially the price did not have to be mentioned, but Nina Brink, WOL, ABN AMRO and Goldman Sachs had not optimally informed the investor. Ninan Brink had created uncertainty, a milder qualification than misleading.

The ruling touches on three points. WOL and the banks did not paint the right picture of Nina Brinks career with a slew of bankruptcies of former companies; also as a member of the board of directors of Newtron she was responsible for a failed IPO. Besides the bidding document mentioned the company Telitel as a subsidiary of World Online, while they still were negotiating. And a series of press releases painted a too optimistic picture of co-operations with blue ribbon companies. The court judged that the banks had not done anything to temper or correct these points.

This case might have been won now by the VEB, but this is not the end. The banks have the possibility to have the case annulled. If they do so, the VEB will have to wait to put down its claim. And once they can put down the claim, solicitors for the banks will fight it. So after six years of legal battles, the investors will have wait for some more years, before they will get paid.

(Just for the record: I did not invest in WOL).

BTW The ruling comes at a bad time for ABN AMRO, as the company was in court later that Thursday. ABN AMRO had sold its American branch LaSalle in four days at 21 billion euro without consulting its shareholders. Also here, VEB brought the case and won.
Blog Posting Number: 743

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