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VEB et alia v. World Online, ABN AMRO and Goldman Sachs

2009 November 27

Court: Netherlands Supreme Court

Date: November 27, 2009

LJN Number: BH2162

Case: World Online (WOL) was a European Internet Service Provider (ISP) which came to prominence in the late 1990s dotcom boom. CEO Nina Brink stepped out of the company shortly after World Online's IPO in 2000 and cashed in heavily, after which the share price collapsed. The IPO proved a disaster and left the reputations of the banks, the Amsterdam stock exchange and the company itself tarnished.

Investor group VEB, which represents nearly 11,000 small investors, initiated legal proceedings against World Online and its IPO managers ABN AMRO and Goldman Sachs, alleging that misleading information had been supplied in the course of the IPO. The Amsterdam Court of Appeal ruled partially in favour of the VEB. According to the Court of Appeal World Online and ABN AMRO and Goldman Sachs acted improperly towards investors buying shares in the IPO or shortly thereafter. On four counts the prospectus was incorrect and incomplete, resulting in World Online, ABN Amro and Goldman Sachs misleading investors. Both parties appealed to the Netherlands Supreme Court.

Held: The Netherlands Supreme Court rejected the complaints of World Online, ABN AMRO and Goldman Sachs. The points on which the Court of Appeal had established that the defendants committed an unlawful act thereby remain in position.
The appeal of VEB is succesful in two additional points. First, the prospectus was misleading where it failed to disclose the price for which Nina Brink, the chairman of World Online, had sold the shares that she indirectly owned through her company Kalexer, about three months before the IPO. Second, the opening price as communicated by ABN AMRO in the first trading day was misleading.

The consequence of this ruling

It has now been established that World Online, ABN AMRO and Goldman Sachs committed a tort (unlawful act) on the following counts:

  • The issue prospectus contains misleading information on the career of CEO Nina Brink and the acquisition of a subsidiary Telitel;
  • The issue prospectus was not correct where it stated that the sale (almost three months before the IPO) by the chairman of World Online shares it owned through her company Kalexer, had occurred for a purchase price of $ 6.04 per share ;
  • The statements of CEO Nina Brink to the press just before the IPO gave the public a false impression about the size of the stake held by founder Nina Brink in World Online. Furthermore, World Online, ABN AMRO and Goldman Sachs should have taken corrective action when confusion arose;
  • In the period just before and after the IPO World Online issued press releases about a dozen alliances with major companies, but in fact there was hardly any, and none had real substance. ABN AMRO and Goldman Sachs failed in their duty as lead managers to guide and instruct World Online so that no overly optimistic picture of its business would be created.
  • Finally, ABN AMRO has acted unlawfully at March 17, 2000 where it effectuated a deceptive opening price of € 50.20, lying well above the fixed issue price.

This decision ends part of the dispute. Still open is the actual discussion about whether damages have been sustained as a result of the unlawful acts that now have been established, and if so, what damages can be awarded.

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