A Kansas court on Wednesday approved a $57.5 million payment by Sprint Corp. to settle a lawsuit from the company’s recombination of two tracking stocks in 2004.
The lawsuit, originally filed in 2005, centered on the company’s handling of a complex conversion of stock in which two separate tracking stocks – PCS (linked to Sprint’s newer wireless business) and FON (tracking Sprint’s traditional landline division) – were “recombined” into a consolidated common stock, bringing substantial profit to Sprint management at the expense of other shareholders left out of the transaction.
Investors alleged that certain charges were added that would enhance the value of the FON holdings while depressing the value of the PCS shares. Sprint’s officials owned a greater percentage of the older FON shares and according to plaintiffs’ complaint, “they knew FON was a mature, declining business beset by problems and thus, in need of bolstering.”
Sprint has denied wrongdoing and said it is settling to avoid court costs.
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