Facebook to Nasdaq: You’re on the Hot Seat!
Facebook (NASDAQ:FB) is crouching behind Nasdaq as it defends itself against charges from investors who sued the company and its underwriting banks for losses incurred during the social network’s IPO last month. In a motion filed before the U.S. Judicial Panel on Multi-District Litigation, the company said the stock exchange’s technical glitches on its opening day of trading contributed to investor confusion and may have led to the losses.
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Facebook raised $16 billion in its IPO on May 17 as it opened the stock for public trading at $38, but its next day’s debut fell short of expectations with the stock ending just a whiff above the offering price. The stock continued to fall over the next few days, and has lost almost a quarter of its value since.
The company cited reports in the media regarding how trading errors may have contributed to the uncertainty around the stock. The motion cited lawsuits “alleging that technical problems and other trading-related errors affecting Facebook’s stock — which Nasdaq has subsequently admitted — created market uncertainty and caused investor losses.”
It also defended its pre-IPO disclosures on mobile user revenue growth and its opening stock price, arguing that plaintiffs “ignore that what Facebook and the underwriter defendants allegedly did both followed customary practices and did not violate any rules.”
Facebook is named in the lawsuit along with lead underwriters Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), and JPMorgan Chase (NYSE:JPM). The defendants also filed a motion asking that the almost dozen shareholder lawsuits be clubbed together in a Manhattan federal court. Nasdaq OMX Group (NASDAQ:NDAQ), the holding company that runs the stock exchange, has also been sued by investors.
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