Lawsuit Filed Against Facebook
May 23, 2012 by UPI - United Press International, Inc.
NEW YORK, (UPI) — Three Facebook investors have filed a civil lawsuit in New York federal court alleging the company and its underwriters failed to disclose forecast changes.
The complaint, filed Wednesday by the law firm Robbins Geller Rudman and Dowd LLP, alleges the public offering document issued in connection with last week’s initial public offering contained false and misleading information in violation of the Securities Act.
The lawsuit asserts Facebook asked analysts with Morgan Stanley and other underwriters to cut the company’s revenue forecasts and then failed to properly disclose that information to investors.
“The complaint asserts that defendants failed to disclose that because Facebook was experiencing a pronounced reduction in revenue growth due to an increase of users of its Facebook app or Web site through mobile devices rather than traditional PCs, at the time of the IPO the company had told the lead underwriters to reduce their 2012 performance estimates for Facebook,” the law firm said Wednesday in a release.
The law firm alleges the revisions were “selectively disclosed by defendants to certain preferred investors and omitted from the Registration Statement and/or Prospectus.”
The investor lawsuit is seeking class-action status.
The Wall Street Journal said a Morgan Stanley spokesman issued a statement Tuesday saying the company “followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations.”