) and a number of banks are likely to face a lawsuit for
providing misleading information to investors prior to the social
media giant's initial public offering (IPO).
In a recent statement issued by a U.S. District Judge, it has
been clearly mentioned that Facebook investors can pursue loss
claims, arising from non-disclosure of some material information,
related to internal projections on how an increase in mobile
usage could lower revenues of the company.
U.S. Judge Robert Sweet is of the opinion that the company's
risk warnings should have included the revenue cut as it had
already materialized. This according to the judge was a clear
case of material misrepresentation, which misguided
Facebook investors include pension funds in Arkansas,
California and North Carolina, who claimed to have suffered from
the concealment of the material facts by the company in the IPO
registration statement distributed to underwriters' analysts.
These investors are now up against the company and seek
damages resulting from the sale or holding of the shares as they
fell below the IPO price and bottomed to $17.55 on Sep 4,
Although the lawsuit does not accuse the company of fraud but
more than 40 defendants were sued, which include big names such
as Facebook chief operating officer Sheryl Sandberg and lead
Goldman Sachs Group Inc
JPMorgan Chase & Co. (
Although Facebook stated that the lawsuit lacks merit, only
time will tell whether it stands in the court of law.
Although the recent acquisition spree, addition of new
features and the recently launched internet.org project go in
favor of Facebook, it remains to be seen how the company handles
this lawsuit and the ever increasing competition from companies
Facebook currently has a Zacks Rank #3 (Hold).
FACEBOOK INC-A (FB): Free Stock Analysis
GOLDMAN SACHS (GS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
LINKEDIN CORP-A (LNKD): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
YELP INC (YELP): Free Stock Analysis Report
To read this article on Zacks.com click here.