Shareholders Sue VA Linux As IPO Practices Are Called Into Question

The piling on is under way for VA Linux(LNUX Quote), the software company that became a symbol of the initial public offering craze a year ago. It's now threatened with becoming a poster child for everything that went wrong with late 1990s IPOs.

Since late January, at least 18 federal lawsuits have been filed against VA Linux, claiming the Fremont, Calif.-based company conspired with its investment bankers in a kickback scheme to drive up the price of its shares in what was the largest percentage gain in at least a decade for a stock in its first day of trading. Those suits, which seek certification as class actions, also name the lead underwriter of the VA Linux IPO, Credit Suisse First Boston, as a defendant.

VA Linux went public at $30 a share on Dec. 9, 1999 and closed that day at $239.25, a 698% increase. The stock closed Friday at $3.44.

And now, VA Linux has been roped into a larger investigation by the Securities and Exchange Commission of the practices of investment banking firms in a number of initial public offerings, centering on how the banks allocated the prized IPO shares and what they may have demanded from the recipients of the shares in return.

Not the Target

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