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Zuckerberg and Big Banks Hit with Lawsuits after Suspicious Facebook Stock Launch
Posted By aaron On May 25, 2012 @ 12:18 pm In Economic Crisis,Tile | Comments Disabled
May 25, 2012
The fallout from Facebook’s Initial Public Offering (IPO) now includes three lawsuits filed against the social media giant and the banks that helped it go public.
At least three shareholder lawsuits allege Facebook and its creator Mark Zuckerberg “failed to disclose material information about its growth prospects,” according to The New York Times. The litigation also names the three leading underwriters of the IPO: Morgan Stanley, JPMorgan Chase and Goldman Sachs.
One of the lawsuits claims Facebook shared important information with certain investors before the company’s stock began trading, but not with the public at-large. The plaintiffs claim that Facebook was “experiencing a severe and pronounced reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices rather than a traditional PC such that the Company told the Underwriter Defendants to materially lower their revenue forecasts for 2012.”
The allegation may represent a violation of federal securities law. In addition to the lawsuits, the Securities and Exchange Commission is examining how the IPO was handled.
Facebook shares opened at $38, but then fell by more than 18% in the first three days of trading.
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