Online broker Charles Schwab Corp. has settled complaints from about 300 investors who said they ended up buying shares of theglobe.com at market prices far above the offering price.
According to Thursday’s Wall Street Journal, the affected investors had losses that could add up to $1.2 million on orders they were unable to cancel before theglobe.com began trading last November. Shares debuted at $9 and ended up trading as high as $97 before closing at $63.50 on the first day of trading.
Some of the investors who lost money have filed arbitration claims against Schwab and other online brokers after they ended up paying more than they could afford for the hot Internet stock.
Schwab said it was unable to process about 300 of the 1,500 cancellation orders it received for the stock before opening-day trading began. Hardy Callcott, Schwab’s general counsel said the company has begun settling those claims. He declined to say how much was being paid to the investors.
Callcott did say investors were unable to cancel orders for 10 minutes before theglobe.com began trading because underwriter Bear Stearns had already posted a price quote for the stock. Typically, market orders can’t be canceled once there’s an active quote.
Last month, Schwab began barring investors from buying IPOs online until after the first day of trading. Investors who buy shares over the phone are required to place a limit order, specifying the highest price they are willing to pay. Schwab is upgrading its computers to allow investors to buy IPOs over the Web if a limit order is placed.
James Eccleston, a Chicago attorney, has also filed a case against E*Trade after his client ended up buying $420,000 in theglobe.com stock although he had only $96,000 in his brokerage account.
An E*Trade spokesman would not say if that firm planned on settling any cases or making refunds. In a letter to the Securities and Exchange Commission, E*Trade said it sheer volume of orders made it impossible to review all customer orders.
