Yesterday some of Facebook’s investors filed a lawsuit against Mark Zuckerberg and the company’s key underwriters for retaining critical information regarding Facebook’s future value.
The company began trading publically last Friday, but its debut will be remembered as lacklustre, with technical glitches interfering with buyers processing their claims, and the day closing with the value of Facebook shares underperforming.
Yesterday's claims appear to heap even more misfortune on the company and its lead bankers.
The lawsuit calls for class action against the defendants, including the Facebook CEO, Morgan Stanley, Goldman Sachs Group and JPMorgan Chase, for with-holding information that pointed to "a severe and pronounced reduction" in Facebook’s revenue growth in Q2, thanks to increase in app and mobile web use.
Reports from Reuters suggest that key underwriters lowered their estimation of the company’s value on hearing game-changing information from Facebook’s top-level execs. This information was then verbally conveyed to a number of “preferred” investors, leaving a number of others in the dark.
Underwriters supposedly at the last minute did lower the amount at which Facebook began trading to $38 last Friday. With the world watching closely, it peaked at $41, however yesterday it closed hovering around the $30 mark.
"The main underwriters in the middle of the roadshow reduced their estimates and didn't tell everyone," said Samuel Rudman, a partner at Robbins Geller Rudman & Dowd, which brought the lawsuit. The firm is among the leading securities class actions firms in the country.
"I don't think any investor in Facebook wouldn't have wanted to know that information."
After the emergence of these serious claims spokespeople on the side of the defendants have been relatively quiet, declining to comment in most instances.
However Andrew Noyes, a Facebook spokesman, said: "We believe the lawsuit is without merit and will defend ourselves vigorously."
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