Facebook and Banks Being Sued Over IPO
This article was written by Amit Chowdhry. You can follow me at @amitchowdhry or on Google+ at +AmitChowdhry
Facebook Inc. (NASDAQ:FB) and banks that include Morgan Stanley are being sued by the shareholders that claimed the defendants weakened growth forecasts ahead of the $16 billion IPO. The defendants including Facebook CEO Mark Zuckerberg are being accused of concealing “a severe and pronounced reduction” in revenue growth forecasts, which resulted from increased use of its app through mobile devices. The lawsuit was filed in the U.S. District Court in Manhattan. In this case, shareholders are saying that research analysts at several underwriters lowered business forecasts for Facebook during the IPO process, but the changes were “selectively disclosed by defendants to certain preferred investors” instead of to the public.
“The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result,” is quoted from the complaint. Facebook shares had dropped 18.4% from the $38 IPO price in the first three days of trading, which reduced the value of stock sold in the IPO by over $2.9 billion. The company’s market cap fell from $108 billion to less than $70 billion since then.