Facebook CEO Mark Zuckerberg faces IPO lawsuit over misleading investors
London – Facebook Inc, chief executive Mark Zuckerberg and dozens of banks could face a lawsuit for misleading investors.
U.S. district judge Robert Sweet made the decision public in Manhattan that the site mislead investors about its health before its 16 billion dollars initial public offering.
He said investors could pursue claims that Facebook should have, prior to its May 2012 IPO, disclosed internal projections on how increased mobile usage and product decisions might reduce future revenue, the Guardian reports.
According to the report, Sweet in his 83-page decision wrote that Facebook’s purported risk warnings misleadingly represented that the revenue cut was merely possible when, in fact, it had already materialised.
He added that plaintiffs have sufficiently pleaded material misrepresentation(s) that could have and did mislead investors regarding the company’s future and current revenues.
In a statement, Facebook said that it believes the suit lacks merit and look forward to a full airing of the facts.
Facebook went public at 38 dollars per share and its share price rose as high as 45 dollars on 18 May 2012, its first day of trading.
It however quickly fell below the offering price and stayed there for more than a year.
According to the report, investors including pension funds in Arkansas, California and North Carolina claimed that Facebook negligently concealed material information from its IPO registration statement that it had provided to its underwriters’ analysts.
They sought damages resulting from their having sold or holding onto the shares as they fell below the IPO price, bottoming at 17.55 dollars on 4 September 2012, the report said.
The lawsuit does not allege fraud.