Profitability Concerns Scuttle Merger Agreement With Verizon
As the dot-com bubble began to collapse, bankruptcies among its customers (which were generally smaller ISPs) forced NorthPoint to restate its earnings for the third quarter of 2000 with more negative numbers than the original quarterly earnings report implied.
After the earnings restatement, Verizon decided to terminate its already-signed agreement to merge its DSL business with that of NorthPoint (and invest an additional $800 million in cash), in return for owning 55% of the new company. Verizon claimed that the restated earnings showed an erosion in NorthPoint's customer base, and an unacceptable increase in their expenses and losses.
Lawsuit upon lawsuit then ensued. First NorthPoint sued Verizon on December 11, 2000, demanding that Verizon complete the merger process it had committed to in the signed merger agreement. Verizon agreed to settle this lawsuit just prior to it going to trial in July 2002, paying the NorthPoint bankruptcy estate $175 million and withdrawing a $31.2 million claim of its own. Then on December 21, an individual shareholder sued NorthPoint for alleged waste of corporate assets, gross mismanagement and breach of contract.
Read more about this topic: NorthPoint Communications
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