A Kansas state judge gave final approval to a $57.5 million settlement over Sprint Nextel’s combination of its tracking stocks three years ago, the Associated Press reported.
“It is one of the largest payments on record in a lawsuit stemming from breach of fiduciary duty,” said law firm Grant & Eisenhofer, which represented co-lead plaintiff Carlson Capital, a Dallas-based institutional portfolio manager.
Back in 1998, Sprint Corp., employing a trendy strategy of that time, created separate stocks to track the fortunes of its wireless and traditional wireline divisions. The company was trying to isolate the valuation of the wireless business, which had begun to grow much faster than the wireline business.
The lawsuit was filed in 2005 after the telecom giant decided to combine the two stocks as telecom companies began to bundle their services. Shareholders argued that the company understated the value of the wireless stock and manipulated the wireline business to the detriment of the wireless division.
Plaintiffs alleged that the arrangement brought “substantial profit to Sprint directors and management at the expense of other shareholders left out of the transaction,” according to Grant & Eisenhofer.
Under the settlement, Sprint Nextel will shell out $10 million and insurers will pay the rest, according to the report.