Another Investor Sues Facebook over IPO

By Tracey E. Schelmetic March 05, 2013

Just when Facebook thoughts its IPO-related legal woes were over, the company is seeing a revival of its problems thanks to a new lawsuit filed by a shareholder. The new lawsuit seeks to force CEO and founder Mark Zuckerberg, directors and other defendants to give up the money they made from selling stock through Facebook’s IPO. The suit alleges the defendants knew the stock was overpriced, and that they failed to disclose weaker revenue trends as more users accessed the website through mobile devices.

The plaintiff, Gaye Jones, is alleging in the lawsuit that information had been selectively shared with the company's IPO underwriters and key investors,  Reuters is reporting today.

While four similar lawsuits filed in New York courts were dismissed by a judge last month because the plaintiffs did not own Facebook stock prior to the IPO, Jones did, which may complicate Facebook’s legal position. A proposed class action is still being heard in federal court in Manhattan, as well.

The new lawsuit was filed in Delaware, where Facebook is incorporated. The IPO’s underwriters, units of JPMorgan Chase & Co, Morgan Stanley and Goldman Sachs Group Inc., are also named as defendants, according to Reuters.

Facebook said in a statement that "we believe this lawsuit is without merit and will defend ourselves vigorously."

On another legal front, last month, it was revealed that Nasdaq was in preliminary talks with the Securities and Exchange Commission (SEC) over a potential settlement related to its botched handling of Facebook's initial public offering (IPO), reported the Wall Street Journal. The two were said to be discussing a monetary penalty of about $5 million. The settlement would be the culmination of an eight-month SEC investigation into the problems with Facebook’s May 18, 2012 IPO.

The day of Facebook's IPO, Nasdaq's systems got caught in a loop while lining up orders before the social-networking company's shares started trading. The opening of trading in Facebook shares was stalled by half an hour. For almost three hours more, Nasdaq failed to send order confirmations to brokers, causing uncertainty about who held what positions, according to the WSJ.




Edited by Brooke Neuman

TechZone360 Contributor

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