The hype surrounding Facebook has rapidly turned sour since the company went public in a media frenzy last Friday. Its share price is collapsing and regulators are investigating allegations that Facebook’s big bank partners withheld key insider information.
Now, Reuters reports that shareholders have filed a lawsuit in Manhattan federal court. The suit claims that Facebook and the banks wrongfully concealed weak growth forecasts, leading to shareholders over-paying for the stock when it debuted last Friday.
In a report this morning, The Wall Street Journal described how Facebook’s Chief Financial Officer, David Ebersman, decided to increase the number of shares offered in the IPO by 25 percent. At the same time, Ebersman also chose to increase the opening price of the shares to $38.
As a result, the market was flooded with too many shares and the IPO quickly fizzled. Shareholders are now accusing Facebook and the bankers of warning institutional investors of a weaker share price while also dumping shares on retail investors who were unaware of the company’s weakened growth forecast.
The lawsuit accuses Facebook, CEO Mark Zuckerberg and the banks of concealing “a severe and pronounced reduction” in forecast growth due to more and more people accessing the site on mobile platforms.
Facebook shares have dipped on three consecutive days, hitting a low of $31 yesterday. The shares are up so far this morning.
Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.
- Social media in Q1: commerce and discovery dominated
- Controversy, courtrooms and the cloud in Q1
- Startup growth and the new recruiting ecosystem
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here