Suit Claims Facebook and Underwriters Failed to Disclose Slow-Revenue Forecasts
Posted May 23, 2012 1:32 PM CDT
By Debra Cassens Weiss
An investor lawsuit filed in Manhattan federal court today alleges Facebook and its underwriters failed to disclose negative forecasts in advance of the company’s initial public offering.
The would-be class action suit alleges Mark Zuckerberg and other defendants concealed forecasts of weakened revenue growth, according to Reuters, the Wall Street Journal’s Deal Journal, ABC News and Venture Beat. The suit was filed by Robbins Geller Rudman & Dowd.
The suit claims disclosures were only made to preferred investors, even as Facebook told underwriters to lower estimates because more users were using mobile apps that don’t generate ad revenue.
A Facebook spokesman said the suit is without merit and a vigorous defense is planned. A spokesperson for lead underwriter Morgan Stanley said its procedures, used in all IPOs, are in compliance with applicable regulations.
Other lawyers have also announced investor lawsuits in other courts, Deal Journal says. One was filed in California by Glancy Binkow & Goldberg, according to Reuters.