24 May Zuckerberg Facing Lawsuits Over Facebook’s IPO Event
Many Facebook shareholders are claiming that important information was withheld from them when Facebook’s IPO event happened last Friday: Facebook’s profits aren’t going to be so hot in the upcoming months.
The shareholders are saying this was valuable information that was absolutely needed to make a judgment on whether or not to buy stock on opening day. Facebook updated its filings with the Securities and Exchange Commission with a statement that indicated that the “mobile movement” to smartphones and tablets is hurting the revenue for Facebook, as mobile platforms do not have advertisement embedded. Over half of Facebook users access the site exclusively via a mobile device.
The shareholders are mostly concerned with the fact that a small group of “elite” shareholders were told about the smartphone shift, and the rest of the community was left in the dark. “The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result,” the complaint says in the Reuters report.
Since the lawsuits, Facebook’s stocks have dropped from $38 to a closing of $32 as of yesterday. Facebook plans to fight the lawsuit, as they find it “without merit”. The lawsuit is making some people and investors think that maybe Facebook’s financial picture isn’t being shared with enough people. “Effective capital markets require transparency and accountability, not one set of rules for insiders and another for the rest of us. There’s a lot that we don’t know about this IPO but a lot that we do,” says one complainer, Sen. Sherrod Brown, in an e-mail to Reuters.
There are a couple of other lawsuits pending against Facebook because of the IPO event, including one that claims that Nasdaq had glitches in how it handled the event and offering.