Class Action Lawsuit Commenced Against Red Hat, Inc. By the Law Offices of Marc S. Henzel

Apr 24, 2001, 01:00 ET from Law Offices of Marc S. Henzel

    PHILADELPHIA, April 24 /PRNewswire Interactive News Release/ -- A class
 action lawsuit has been filed on behalf of all persons and entities who
 purchased, converted, exchanged or otherwise acquired the common stock of
 Red Hat, Inc. (Nasdaq: RHAT) between August 11, 1999 and March 19, 2001
 inclusive.
     The lawsuit asserts claims under Sections 11, 12 and 15 of the Securities
 Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of
 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover
 damages.  The action, Robert Berkowitz v. Red Hat, Inc., et al., is pending in
 the U.S. District Court for the Southern District of New York (500 Pearl
 Street, New York, New York).  The complaint alleges that Red Hat, Inc., Robert
 F. Young, Red Hat's Chairman, Matthew J. Szulik, its Chief Executive Officer,
 and Marc Ewing, one of its directors, violated the federal securities laws by
 issuing and selling Red Hat common stock pursuant to the August 11, 1999 IPO
 without disclosing to investors that at least one of the lead underwriters and
 two of the other underwriters in the offering had solicited and received
 excessive and undisclosed commissions from certain investors.
     In exchange for the excessive commissions, the complaint alleges, lead
 underwriter The Goldman Sachs Group, Inc. and underwriters Credit Suisse First
 Boston Corp. and Merrill Lynch, Pierce, Fenner & Smith, Inc. allocated Red Hat
 shares to customers at the IPO price of $14 per share.  To receive the
 allocations (i.e., the ability to purchase shares) at $14, the defendant
 underwriters' brokerage customers had to agree to purchase additional shares
 in the aftermarket at progressively higher prices.  The requirement that
 customers make additional purchases at progressively higher prices as the
 price of Red Hat stock rocketed upward (a practice known on Wall Street as
 "laddering") was intended to (and did) drive Red Hat's share price up to
 artificially high levels.  This artificial price inflation, the complaint
 alleges, enabled both the underwriters and their customers to reap enormous
 profits by buying stock at the $14 IPO price and then selling it later for a
 profit at inflated aftermarket prices, which rose as high as $56.75 during its
 first day of trading.
     Rather than allowing their customers to keep their profits from the IPO,
 the complaint alleges, the defendant underwriters required their customers to
 "kick back" some of their profits in the form of secret commissions.  These
 secret commission payments were sometimes calculated after the fact based on
 how much profit each investor had made from his or her IPO stock allocation.
     The complaint further alleges that defendants violated the Securities Act
 of 1933 because the Prospectus distributed to investors and the Registration
 Statement filed with the SEC in order to gain regulatory approval for the Red
 Hat offering contained material misstatements regarding the commissions that
 the underwriters would derive from the IPO transaction and failed to disclose
 the additional commissions and "laddering" scheme discussed above.
     Plaintiff is represented by The Law Offices of Marc S. Henzel.  If you are
 a member of the class described above, you have until May 28, 2001, to
 participate in the case and ask the Court to appoint you as one of the lead
 plaintiffs for the Class.  In order to serve as lead plaintiff, however, you
 must meet certain legal requirements.  You do not need to seek appointment as
 a lead plaintiff in order to share in any recovery.
     If you have any questions concerning this case or your rights or interests
 with respect to these matters, please contact:  Marc S. Henzel, Esq. of The
 Law Offices of Marc S. Henzel, 210 West Washington Square, Third Floor
 Philadelphia, PA 19106, by telephone at (888) 643-6735 or (215) 625-9999, by
 facsimile at (215) 440-9475, by e-mail at Mhenzel182@aol.com or visit the
 firm's website at http://members.aol.com/mhenzel182.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X80316962
 
 

SOURCE Law Offices of Marc S. Henzel
    PHILADELPHIA, April 24 /PRNewswire Interactive News Release/ -- A class
 action lawsuit has been filed on behalf of all persons and entities who
 purchased, converted, exchanged or otherwise acquired the common stock of
 Red Hat, Inc. (Nasdaq: RHAT) between August 11, 1999 and March 19, 2001
 inclusive.
     The lawsuit asserts claims under Sections 11, 12 and 15 of the Securities
 Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of
 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover
 damages.  The action, Robert Berkowitz v. Red Hat, Inc., et al., is pending in
 the U.S. District Court for the Southern District of New York (500 Pearl
 Street, New York, New York).  The complaint alleges that Red Hat, Inc., Robert
 F. Young, Red Hat's Chairman, Matthew J. Szulik, its Chief Executive Officer,
 and Marc Ewing, one of its directors, violated the federal securities laws by
 issuing and selling Red Hat common stock pursuant to the August 11, 1999 IPO
 without disclosing to investors that at least one of the lead underwriters and
 two of the other underwriters in the offering had solicited and received
 excessive and undisclosed commissions from certain investors.
     In exchange for the excessive commissions, the complaint alleges, lead
 underwriter The Goldman Sachs Group, Inc. and underwriters Credit Suisse First
 Boston Corp. and Merrill Lynch, Pierce, Fenner & Smith, Inc. allocated Red Hat
 shares to customers at the IPO price of $14 per share.  To receive the
 allocations (i.e., the ability to purchase shares) at $14, the defendant
 underwriters' brokerage customers had to agree to purchase additional shares
 in the aftermarket at progressively higher prices.  The requirement that
 customers make additional purchases at progressively higher prices as the
 price of Red Hat stock rocketed upward (a practice known on Wall Street as
 "laddering") was intended to (and did) drive Red Hat's share price up to
 artificially high levels.  This artificial price inflation, the complaint
 alleges, enabled both the underwriters and their customers to reap enormous
 profits by buying stock at the $14 IPO price and then selling it later for a
 profit at inflated aftermarket prices, which rose as high as $56.75 during its
 first day of trading.
     Rather than allowing their customers to keep their profits from the IPO,
 the complaint alleges, the defendant underwriters required their customers to
 "kick back" some of their profits in the form of secret commissions.  These
 secret commission payments were sometimes calculated after the fact based on
 how much profit each investor had made from his or her IPO stock allocation.
     The complaint further alleges that defendants violated the Securities Act
 of 1933 because the Prospectus distributed to investors and the Registration
 Statement filed with the SEC in order to gain regulatory approval for the Red
 Hat offering contained material misstatements regarding the commissions that
 the underwriters would derive from the IPO transaction and failed to disclose
 the additional commissions and "laddering" scheme discussed above.
     Plaintiff is represented by The Law Offices of Marc S. Henzel.  If you are
 a member of the class described above, you have until May 28, 2001, to
 participate in the case and ask the Court to appoint you as one of the lead
 plaintiffs for the Class.  In order to serve as lead plaintiff, however, you
 must meet certain legal requirements.  You do not need to seek appointment as
 a lead plaintiff in order to share in any recovery.
     If you have any questions concerning this case or your rights or interests
 with respect to these matters, please contact:  Marc S. Henzel, Esq. of The
 Law Offices of Marc S. Henzel, 210 West Washington Square, Third Floor
 Philadelphia, PA 19106, by telephone at (888) 643-6735 or (215) 625-9999, by
 facsimile at (215) 440-9475, by e-mail at Mhenzel182@aol.com or visit the
 firm's website at http://members.aol.com/mhenzel182.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X80316962
 
 SOURCE  Law Offices of Marc S. Henzel