This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

JPMorgan Settles IPO Class Action

It appears JPMorgan Chase (JPM - Get Report) learned a lesson from the WorldCom litigation.

The bank has become the first Wall Street firm to reach a settlement in the long-running class-action lawsuit into the manipulation of stock sold in initial public offerings.

The nation's third-largest bank confirmed late Thursday that it has reached a tentative deal with the plaintiffs' law firms to pay $425 million to resolve the litigation. The suit alleges that 55 Wall Street investment firms defrauded investors by artificially inflating the value of hundreds of dot-com IPOs in the late 1990s.

JPMorgan is the first bank to reach a settlement in the case. A bank spokesman said the payout would have no "material'' impact on the company.

It's believed the bank has set aside sufficient money in a legal reserve to cover the cost of the settlement, so it won't have to take any charge against earnings.

A year ago, JPMorgan was the last large bank to reach a settlement with shareholders of WorldCom, agreeing to pay $2 billion. But by waiting until the bitter end to strike a deal, the bank made a strategic blunder that ended up costing it more money.

If JPMorgan had settled the WorldCom case in 2004, around the same time as Citigroup (C - Get Report), it likely would not have had to pay much more than $1.4 billion. JPMorgan miscalculated that it would get off easier by waiting to settle.

However, that proved to be the wrong course of action. That's because the judge in the WorldCom case ruled that JPMorgan, as one of the lone defendants, could potentially be on the hook for up to $10 billion in damages. A few days after that court ruling, the bank agreed to settle.

Now that the plaintiffs' lawyers have reached a tentative deal with JPMorgan, they will probably put pressure on other banks to reach similar settlements.

The deal with JPMorgan comes two years after the plaintiffs' reached a tentative $1 billion settlement with 309 mostly dot-com companies, whose initial public offerings were allegedly manipulated the by the Wall Street firms. One of the companies included in that preliminary deal was (TSCM), publisher of this Web site.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $46.28 0.00%
JPM $63.20 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs