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Introduction
In December 2020 the Supreme Court handed down a decision in relation to certain obligations of lead underwriters and bookrunners in an initial public offering (IPO).(1) Although the underlying facts related to an IPO, the judgment also applies to underwriters involved in the submission of a securities registration statement and there are useful takeaways for any company faced with investigating allegations of impropriety made by a whistleblower.
The case related to a now bankrupt semiconductor manufacturer, FOI, which was listed on the Market of the High-Growth and Emerging Stocks (Mothers) Index of the Tokyo Stock Exchange (TSE) in 2009.(2) Mizuho Securities Company Limited acted as lead underwriter for FOI in its IPO.
The offer, which is for a reported $20 billion (£14.5 billion), came from private equity firm CVC Capital Partners, which has an office in London and its official headquarters in Luxembourg.
Toshiba has had a rocky few years which saw it hit by scandals and forced to sell parts of its business. Over a period of seven years, the Japanese tech giant claimed its profits were $1.3bn higher than they really were, which became known as the Toshiba accounting scandal in 2015. Japan’s Securities and Exchange Surveillance Commission recommended a $60 million penalty to the firm following the accounting fraud.
Toshiba’s president and vice-president left the company as an independent panel found it had overstated its profits.
A retail investor buys shares in a small company, touts his position on social media and inspires a horde of followers to do the same. The stock price goes to the moon before crashing back to earth.