Investors Seek Revenge Against Facebook
Facebook (NASDAQ:FB) shareholders are suing Facebook and banks — including Morgan Stanley (NYSE:MS) — for hiding the social networking company’s weakened growth forecasts ahead of its $16 billion initial public offering. Facebook went public last week.
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Shareholders also accused Facebook Chief Executive Officer Mark Zuckerberg for concealing from investors during the IPO marketing process a severe and pronounced reduction in revenue growth forecasts, resulting from increased use of it app or website through mobile devices. According to a law firm for the plaintiffs, the lawsuit was filed in U.S. District Court in Manhattan on Wednesday. A similar lawsuit was filed a day earlier in a California state court by a different investor, according to a law firm involved in that case.
As for the case in New York, shareholders assert that research analysts at several underwriters had lowered their business forecasts for Facebook during the IPO process, but that these changes were selectively disclosed by defendants to certain preferred investors rather than to the public generally. The complaint stated that the value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result. Facebook and Morgan Stanley did not comment on the issue.
Shares of Facebook declined 18.4 percent from their $38 IPO price in the first three days of trading, which reduced the value of the stock sold in the IPO by more than $2.9 billion.
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