Facebook and banks behind flotation face lawsuit
Published: 23rd May 2012 15:57:37
Facebook, its founder Mark Zuckerberg, and the banks leading its flotation are being sued by disgruntled shareholders.
A writ, filed in a Manhattan court, alleges that Facebook's revised growth figures were not disclosed to all investors.
US financial regulators have already said the Morgan Stanley may have questions to answer over the disclosure of information ahead of Friday's float.
The bank, lead underwriter to Facebook, said it fully complied with the rules.
The lawsuit claims that defendants concealed from investors during the flotation marketing process "a severe and pronounced reduction" in revenue growth forecasts.
It is the latest problem to dog one of the most anticipated stock market listings of recent times.
The flotation was disrupted on Friday by technical glitches on the Nasdaq stock exchange. The share price has since slumped amid worries that the company was over-valued by advisers marketing the float.
On Tuesday, the leading financial regulator in Massachusetts issued a subpoena to Morgan Stanley as part of an investigation into whether its analysts selectively disclosed revised revenue forecasts for Facebook.
Now, a group of investors has issued a class-action lawsuit alleging that Facebook revenues were revised down because of a surge in the number people using mobile devices for apps and connection to websites.
Morgan Stanley has not yet commented on the latest lawsuit.
On Tuesday, in response to the Massachusetts subpoena, said the company was "in compliance with all applicable regulations" and had "followed the same procedures for the Facebook offering that it follows for all initial public offerings".
Meanwhile, there was some good news at the start of trading on Wall Street, with Facebook shares up 3.4% at $32 shortly after the opening bell.
The shares listed at $38-a-share, and fell as low as $31 on Tuesday.
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Harvard CitationBBC News, 2012. Facebook and banks behind flotation face lawsuit [Online] (Updated 23rd May 2012)
Available at: http://www.ukwirednews.com/news/1430436/Facebook-and-banks-behind-flotation-face-lawsuit [Accessed 25th Apr 2014]
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