Facebook may face a lawsuit for providing misleading information to investors prior to its IPO. According to a recent statement by a U.S. District Judge, Facebook investors can pursue loss claims, arising from non-disclosure of some material information, related to internal projections.
The company didn’t want to disclose how an increase in mobile usage could lower revenues of the company. According to the statement, company’s risk warnings should have included the revenue cut as it had already materialized. This is a clear case of material misrepresentation, which misguided investors.
Facebook investors include pension funds in Arkansas, California and North Carolina, who claimed to have suffered from the concealment of the material facts by the company in the IPO registration statement distributed to underwriters’ analysts. These people can now claim damages on the company resulting from the sale or holding of the shares as they fell below the IPO price and bottomed to $17.55 on Sep 4, 2012.
Although no fraud charges have been laid upon the company, 40 defendants were sued including big names such as Facebook chief operating officer Sheryl Sandberg and lead underwriter Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Facebook states that the lawsuit lacks merit but the law may disagree.
via SocialAppsHQ Blog http://www.socialappshq.com/blog/2013/12/26/facebook-to-face-lawsuit/
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