Facebook is Sued!


Bangalore: Adding to the Facebook IPO fiasco, shareholders of the social network sued the company and its bankers for the share slides on the first day and for hiding the revenue forecasts. Some of them even threaten to seek ‘remedies’ for the massive loss on the shares.

Robbins Geller Rudman & Dowd, the law firm announced today morning that a class action law suit has been commenced in the United States District Court against the social network as well as its underwriters, Morgan Stanley on behalf of purchasers of Facebook.

The suit alleges Facebook of hiding “a severe and pronounced reduction in revenue forecasts from its investors.”  According to a Reuters report yesterday, many investors were shocked when Morgan Stanley unexpectedly cut the Facebook estimates just before the IPO and to make things worse, a Business Insider report yesterday stated that Facebook executive actually asked the underwriting banks to cut estimates, without sharing the news to small investors.

“The true facts at the time of the IPO were that Facebook was then experiencing a severe and pronounced reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices … such that the Company told the Underwriter Defendants to materially lower their revenue forecasts for 2012,” stated the suit. “The underwriters then subsequently lowered their estimates for 2012, which revisions were material information which was not shared with all Facebook investors, but rather, was selectively disclosed by defendants to certain preferred investors,” continued the complaint.

With its bad debut, rumors have been spreading in Silicon Valley about Facebook and its fishy IPO. With the latest law suit, the picture is becoming clearer.