Stockholders v TyCom, Ltd.
TyCom's Stockholders Lose $1 Billion
A class action has been filed against undersea fiber-optic cable business TyCom, Ltd. (formerly NYSE: TCM), Tyco International, Ltd. (NYSE: TYC), and other parties by TyCom stockholders who purchased the company's common stock between July 26, 2000, and December 18, 2001. The action claims that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
TyCom became a public company on July 26, 2000 by the issuance of approximately 60 million shares of its common stock (equivalent to approximately 10% of TyCom's shares outstanding) in an initial public offering. The action claims that the defendants made materially false and misleading statements about the underlying purpose for TyCom's IPO and failed to disclose that the true purpose for the offering was to generate "bonuses" that would be used by individual defendants Kozlowski and Swartz and approximately 40 other Tyco officers to repay approximately $100 million in undisclosed and unauthorized loans from Tyco. The Complaint further alleges that the Registration Statement misrepresented and failed to disclose in its summary compensation table, tens of millions of dollars of other unauthorized loans and payments from Tyco to the individual defendants.
On December 18, 2001, having realized their goals of generating bonuses to repay the outstanding loans, the defendants caused Tyco to acquire the minority interest of TyCom at a price approximately 50% below the offering price of those shares in July 2000. Members of the plaintiff class who purchased shares of TyCom common stock pursuant to the Registration Statement suffered a decline in value of those shares of approximately one billion dollars.
TyCom is now a wholly-owned subsidiary of Tyco International, and its stock is no longer traded.
