Damson Oil on Thursday sued Seaborg, a Redondo Beach investment company, charging that it manipulated Damson's stock price in order to buy the shares at artificially low prices.
The New York-based oil company, in a suit filed in U.S. District Court in Manhattan, charged also that Seaborg lied to the Securities and Exchange Commission about a discussion it had with Damson executives.
G. Louis Graziadio III, chairman and chief executive of Seaborg, would only say that the suit contained "wild accusations by a desperate management."
Damson also is suing Graziadio, his father, George L. Graziadio Jr., and the trustees of the Graziadio Family Trust, which owns Seaborg.
Seaborg, a real estate investment and development, property management and securities investment company, owns 9% of Damson Oil and has said that it may seek control of the company. In a November filing with the SEC, Seaborg said it had bought Damson shares because it believed them to be undervalued.
Damson executives declined Thursday to elaborate on the suit.
In the suit, Damson said that, between Sept. 11 and Nov. 11 of last year, Seaborg's buying and selling usually constituted between 33% and 85% of the daily volume of Damson shares traded; that on seven days, Seaborg sold the stock at prices that, after broker's commissions, were lower than the lowest market price on those days, and that the price of Damson shares usually dropped after a sale by Seaborg.
According to the suit, Seaborg bought 653,200 shares at an average price of $3.81 and sold 112,300 shares at an average price of $4 during the period, and the closing price of Damson shares on the American Stock Exchange fell to $3.625 from $4.50. After Nov. 11, the suit alleges, Seaborg doubled its holdings in Damson by buying 282,900 shares at the lower prices.
"The conclusion is inescapable that the purpose of the series of transactions . . . was to manipulate the market price of Damson Oil stock so that the defendants might purchase substantial blocks of such stock at prices significantly below fair value," Damson said. The oil company alleged that the elder Graziadio bought and sold Damson stock in a similar manner between last Nov. 22 and Dec. 3. The elder Graziadio owns 1.7% of Damson.
The suit also denies Seaborg's contention that Damson was unwilling to discuss any transaction "intended to maximize the value of the common stock for the company's shareholders." In an SEC filing Tuesday, Seaborg said Damson management wanted only to discuss a pact under which Seaborg would agree to stop buying Damson shares.
Damson said that at a Dec. 31 meeting, Damson executives proposed the standstill agreement "to provide a framework for a substantial investment by Seaborg in or with Damson Oil" to increase the value of Damson's shares.