Business, Economics and Jobs

Facebook, Zuckerberg and banks sued over IPO


Facebook founder and CEO Mark Zuckerberg delivers the opening keynote address at the f8 Developer Conference April 21, 2010 in San Francisco, California.


Justin Sullivan

Facebook shareholders have filed a lawsuit against the website, its CEO Mark Zuckerberg, and a number of banks, including Morgan Stanley, for concealing crucial information was concealed ahead of Facebook's IPO, CNET News reported, CNET News reported.

According to Reuters, the lawsuit, which was filed in the US District Court in Manhattan today, charges the defendants with failing to disclose in the critical days leading up to Friday's IPO "a severe and pronounced reduction" in forecasts for Facebook's revenue growth.

The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result," the complaint said. 

More from GlobalPost: Facebook stock declines, Morgan Stanley, Nasdaq under fire

Currently Facebook stock is trading at $32, down from the initial public offering price of $38.

Henry Blodget, a Wall Street watcher and Business Insider writer, told CBS This Morning today that a source informed him that a Facebook executive was responsible for telling institutional investors, but not smaller investors, about the reduction in revenue estimates. Blodget said, "The fact that it was only distributed verbally to a handful of institutions as opposed to all investors is a problem."

Blodget wrote for Business Insider, "As I described earlier, at best, this 'selective disclosure' of the estimate cut is grossly unfair to investors who bought Facebook stock on the IPO (or at any time since) and didn't know about it. At worst, it's a violation of securities laws."

This suit comes on the heels of another lawsuit against Nasdaq. According to Bloomberg, Phillip Goldberg, a Maryland investor, filed a complaint several days ago in Manhattan federal court claiming that he tried to both order and cancel requests for Facebook shares through an online Charles Schwab Corp. account May 17.  

Bloomberg reported, "He is seeking to represent a class of investors who lost money because their buy, sell or cancelation orders for Facebook stock weren’t properly processed, according to the filing."

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