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Investors Sue Leap Wireless Over AT&T Buyout Bid

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Leap Wireless International, Inc. (NASDAQ:LEAP) has been sued by one of its shareholders who believes that AT&T Inc. (NYSE:T)’s $1.2 billion buyout offer significantly undervalues the company’s actual worth. The Booth Family Trust alleges that Leap directors acted in bad faith when they set the price at $15 per share, Bloomberg’s Phil Milford reports.

Investors Sue Leap Wireless Over AT&T Buyout Bid

Leap Wireless International, Inc. (NASDAQ:LEAP), which sells pay-as-you-go mobile services through its subsidiary Cricket, announced that it would join AT&T on July 12, but Booth lawyers contend that the transaction “fails to maximize shareholder value” because it does not account for the company’s growth potential or the future value of its wireless capacity.

The case will be tried in Delaware Chancery Court.

Public Pressure Mirrors Opposition To Defeated AT&T, T-Mobile deal

The deal is also facing significant pressure from public interest groups who are asking federal authorities to prevent the two companies from merging, reports Sam Gustin at Time. AT&T Inc. (NYSE:T), which is currently the nation’s second largest carrier, had been trying to purchase T-Mobile, but eventually gave up in the face of mounting anti-trust opposition. The Leap deal will face a similar federal review process and, in all likelihood, a similar level of opposition as Leap is the nation’s sixth largest carrier and would greatly increase AT&T’s market presence.

“AT&T already has more wireless capacity than it needs to serve its customers, and it should focus on using what it has rather than continuing to try to buy out competitors,” said Harold Feld of the consumer advocacy group Public Knowledge. “The wireless marketplace does not need more mergers.”

AT&T Inc. (NYSE:T) says that it is interested in acquiring Link to “jump start AT&T’s expansion into the highly competitive pre-paid segment,” but major carriers are working to expand their available spectrum as data usage by smart phones and tablets continues to increase.

Surge In Leap Wireless Futures Leads To Suspicions Of Insider Trading

Further controversy surrounding the deal started when traders noticed unexpected activity in Leap Wireless International, Inc. (NASDAQ:LEAP) futures immediately before the AT&T deal was announced. People who purchased Leap futures could make as much as $4.6 million according to the Wall Street Journal’s Kaitlyn Kiernan.

Aside from the unusually large volume of trades, whoever was buying options on Leap Wireless International, Inc. (NASDAQ:LEAP) was doing so in chunks throughout the day, not buying all at once. This has created the suspicion that the investor was trying to keep option prices low and prevent others from realizing that something may be happening.

According to Trade Alert LLC, Leap options averaged 1,624 options per day for the previous month, but there were 7,139 contracts traded last Friday, with 6,789 calls, showing a clear bias towards bullishness. No action on the suspicious trades has been announced as of yet.

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