Claims of insider share dealing at Compaq in February have sparked a flurry of shareholder lawsuits, accusing the vendor of issuing misleading statements to inflate the stock price.
A group of Compaq executives sold about $45 million worth of stock in February before the vendor told financial analysts it had noticed a slowdown in PC sales for the first quarter.
Most of the executives sold their shares for about $46 each during February.
In the week after Enrico Pesatori, senior vice president of corporate marketing at Compaq, briefed analysts in a closed meeting on the PC slump, Compaq's share price dropped by about 25 per cent, reaching a low of $31.5 on 2 March. It has since remained between $30 and $33.
There are windows of time within which company executives, inevitably prior to privileged information, are allowed to sell their shares. But shareholder lawsuits can be issued even inside these windows when it is alleged that insiders misled the markets or used inside information to sell at an inflated share price.
According to documents from the Security and Exchange Commission, 11 high-ranking Compaq executives sold almost one million shares in total between 1 February and 24 February.
The people who sold stock in that period were Earl Mason, who sold about 265,000 shares; Hans Gutch, 112,756; William Strecker, 120,000; John Rose, 110,000; Mike Winkler, 103,336; John Rando 75,615, Thomas Stekman, 60,000, Kenneth Lay, 30,000; Rodney Schrock; 12,249: and Pesatori, who sold at least 10,000 shares. Michael Heil was also listed as having sold an unspecified amount of shares during this time period.
A lawsuit issued by lawyers Marc Henzel is the fourth to be filed against Compaq on the matter, representing a large number of individual investors.
It stated: 'The complaint alleges that defendants Compaq and certain of its officers violated federal securities laws by misrepresenting, or failing to disclose the slowdown in demand for and sales of Compaq's products in the first quarter of 1999. As a result of the defendants' false and misleading statements and omissions, the price of Compaq's common stock was artificially inflated.'
Compaq refused to comment.
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