Facebook And Wall Street Banks Sued By Shareholders
A class-action lawsuit was filed Wednesday against Facebook, Morgan Stanley & Co., and other Wall Street banks by Facebook's leading shareholders, which claimed that Facebook and the banks did not reveal weakened growth forecasts before its $16 billion public offering.
Facebook Chief Executive Officer Mark Zuckerberg and the other defendants allegedly withheld a "severe and pronounced reduction" in revenue growth expectations that resulted from users' increased use of the website on mobile devices.
According to the Huffington Post, Facebook shares fell 18.4 percent from their $38 IPO price in the first three days of trading, reducing the value of stock sold in the IPO by more than $2.9 billion.
The suit was filed in federal court in New York, and also claimed that the IPO prospectus and registration statement made in advance of the public offering violated the Securities Act.
The Los Angeles Times said: The suit alleges that Facebook had told the lead underwriters of the IPO to reduce their 2012 estimates for the company and that information was "selectively disclosed" to preferred investors and left out of the prospectus and registration statement.
A spokesman for Facebook said it will fight the suit.