A group of investors, including Dell Computer & T. Rowe Price and Associates, is suing Internet incubator idalab, seeking to dissolve the company and return the assets directly to the shareholders. The suit, filed by a group that invested nearly $1billion, appears to be a growing trend between investors and incubator companies.

In November 2001, the Internet incubator 12 Entrepreneuring Inc., a San Francisco company, was closed by a group of investors not happy with their losses.

Idealab?s founder, Bill Gross reached star status during the internet boom, taking companies like eToys.com public. However, the fortunes of idealab mirrored the companies it invested in as company after company folded, including eToys.com.

In the most recent suit, investors charged that idealab?s founder & Chief executive, Bill Gross and Marcia Goodstein, President (and his fiancée), have kept the incubator going to finance their own lifestyles and protect a $50 million bank loan. It was reported in the Wall Street Journal today that Mr. Gross denied the allegations and would fight the suit.

The suit further claimed that idealab has about $500 million in cash and marketable securities and therefore investors should get 50 cents on each dollar invested. Mr. Gross offered only 10 cents on the dollar in an earlier offer to buy back shares. Only 10% of the investors had accepted his offer. The suit also charges idealab?s board with breaching its responsibility to shareholders by doubling the salaries of Mr. Gross & Ms. Goodstein.

Mr. Gross has been quoted as saying that some of the nine companies founded last year by idealab are successful. Further, Mr. Gross characterized the suit as a pressure tactic to change the terms of the buyout he had offered earlier.