Facebook lawsuits by shareholders after the IPO release

After Facebook's sharp revenue decline and lack of disclosure

WRITTEN BY: Elif Geris
Morgan Stanley one of the few out of the dark
Image Source: Jenix89 via wiki commons/Ludovic Toinel via Flickr
Morgan Stanley one of the few out of the dark

Everybody’s favorite social network is facing charges since last week’s initial public offering (IPO) release. After Facebook’s release last Friday, shareholders filed a lawsuit once investment banks appeared to be sharing investors’ information with only select, large clients.

When the IPO was first released, the number of Facebook investors climbed to 421 million shares, each worth $38, but they proceeded to drop by nearly 18% to $31, according to The Wall Street Journal.

Facebook and its investment banks on Wall Street, such as Morgan Stanley, Goldman Sachs and others, “failed to disclose that during the IPO roadshow, the lead underwriters... cut their earnings forecasts and that news of the estimate cut was passed on only to a handful of large investor clients, not to the public," said law firm Glancy Binkow & Goldberg.

Among the shareholders of Facebook is Girard Gibbs LLP, which noticed this lack of disclosure especially after the stock’s fall. One of the significant causes to the drop is the prevalent use of Facebook Mobile. A Registration Statement released did not include this information, but only the larger investors got wind of such leading factors.

One of Facebook’s investment banks being sued is Morgan Stanley. While Morgan Stanley withheld comments and Facebook argued the premise of the lawsuit to be false, the main complaint is that investors were misled by Facebook IPO documents.

At one of the IPO meetings, beginning last March, it was discovered that Facebook Mobile use is in fact prevailing over the company’s revenue. This was included in a revised IPO document.

After correspondence with the New York Stock Exchange, Facebook deemed it necessary to transfer its stocks away from Nasdaq Stock Market due to a lacking offering.

The need for a hearing is to be determined by Sen. Tim Johnson, D-S. D. after further discussion with Facebook representatives.
 

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