BALA CYNWYD, Pa.—The law offices of Marc Henzel in Bala Cynwyd, Pa., and Cauley Geller Bowman & Coates L.L.P. in Little Rock, Ark., joined several other firms in filing class action lawsuits in the U.S. District Court for the Eastern District of Virginia on behalf of purchasers of XO Communications Inc. common stock.
The complaints allege, among other things, that XO issued false and misleading statements regarding its financial condition as well as its present and future business prospects. In particular, the complaints allege that XO misled the investing public concerning the ability of the company to survive until it would be cash flow positive, which executives at XO previously predicted would occur in 2003.
The lawsuits are the result of a financial restructuring package XO approved in December that allows Forstmann Little & Co. and Telefonos de Mexico S.A. de C.V. to each put up $400 million in exchange for new equity in the company.
For their $800 million, Forstmann Little—which already has $1.5 billion invested in XO—and Telmex will each receive a 39-percent stake, but common shareholders, who at one time could say their XO stock was worth $66 per share, will get nothing. The remaining 21 percent of the company is going to XO employees and owners of the company’s senior notes.
The lawsuits seek to recover losses suffered by individual and institutional investors who purchased XO’s stock at artificially inflated prices.
