BPN 1407 Nine years on: WorldOnline and its banks did mislead investors

Last weekend I was in Paris for a meeting. I don't think it is fun to be in Paris. People there get too many tourists to be nice and earn their money with unfriendliness. But during that weekend a long awaited ruling was published by the Dutch High Court on a cause celebre: WorldOnline (WOL).

The Dutch ISP WorldOnline (WOL) and the two banks ABN AMRO and Goldman Sachs have misled the investors, when the company brought its stocks to the market. And the statement of CEO, Nina Brink, saying 'I didn't sell any shares at this time' was confusing to the investors, as she had sold part of her shares to companies and friends for 6,04 US dollar per share three months before the IPO, but had this fact not mentioned in the prospectus. That is the outcome of the ruling from the Dutch High Court in the case of the investors’ association VEB against WorldOnline and her banks.

The investors’ association has represented 10.300 stock buyers since 2000, when WorldOnline brought its shares to the Amsterdam stock market. On Friday March 17, 2000 WOL was noted on the Amsterdam Stock Exchange and listed for 43 euro per share. WorldOnline picked up 1,8 billion euro. On the first day the quote went even above 50 euro, but the next day the quote dropped and kept dropping. When the press reported that Nina Brink had sold shares before the IPO, many private investors felt fooled. It was the beginning of the end for WorldOnline. On April 13, 2000 Nina Brink was dismissed as CEO and WorldOnline was sold for a fraction (5,5 billion euro in shares) of the estimated value (18 billion euro) to the Italian ISP Tiscali.

The VEB is happy with the ruling as it is a principal ruling for the private investor. A prospectus should not be misleading, the ruling said, and the WorldOnline propspectus did. The composer of the prospectus is directly responsible for the correctness of the texts and statements.

So now the dancing for the money starts. VEB and the stock buyers will look on while WorldOnline and the banks make out who will pay the bill. WorldOnline still exist as a registered company, still has money and insurance. The two banks will have to fight over their shares in the repayment.

Whether WorldOnline or the banks will claim money from Nina Brink is unknown. Her lawyer informed the press already, stating that Nina Brink will not have to pay as the founder and former CEO of WorldOnline was not involved in the composition of the prospectus. Yet the High Court did not leave much doubt in its last ruling stating that Nina Brink had been unclear about her shares and that her amount had been represented incorrectly in the prospectus.

It will still take some time for the bell to ring for the last dance and pay-out to the 10.300 private investors, some of whom only invested this one time in their lifetime.

Blog Posting Number: 1407

Tags: ISP

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

Tags: internet hype