Facebook hit by lawsuit over its float
FACEBOOK shares rose three per cent to $32 yesterday, reversing the stock’s two-day slide.
But the internet idol’s IPO woes are far from over after Facebook was yesterday hit by lawsuits from disgruntled shareholders.
US law firm Robbins Geller filed a class action on behalf of new Facebook investors, alleging that the prospectus issued ahead of the IPO was “false and misleading”.
The suit, which is also directed at Morgan Stanley and Mark Zuckerberg, claims that Facebook revenue forecasts which were downgraded just days before the flotation were “selectively disclosed by the defendants to certain preferred investors”.
The complaint, one of four filed in the last two days, said: “The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result.”
But Facebook, in its first public statement since its float last week, said: “We believe the lawsuit is without merit and will defend ourselves vigorously.”
The legal filing has triggered debate about the fairness of the rule which prevents analysts linked to the advising banks publishing forecasts on a company about to float, but allows them to discuss the guidance verbally.
Morgan Stanley was issued with a subpoena on Tuesday night over the same issue of analysts sharing forecasts with select investors.
Nasdaq is also yet to escape the firing line after receiving a claim for financial compensation from Knight Capital, which said last night it expects to suffer up to a $35m loss due to trading glitches during Facebook’s market debut.
The NYSE last night denied it was courting Facebook in the hope the tech giant would transfer its listing from Nasdaq.