Now that the stock has fallen following Facebook’s IPO, shareholders are suing the company and the underwriters of the IPO for hiding “severe and pronounced” reductions in Facebook’s revenue growth forecasts.
Mark Zuckerberg is listed as one of the defendants in the suit, which was filed in a U.S. District Court in Manhattan on Wednesday. A similar suit was filed against the company in California earlier this week.
“It probably shouldn’t surprise anyone that while the company’s initial stock offering was a boon to the company and insiders, it’s been a costly disappointment for the general public,” suggests a Los Angeles Times editorial.
“Now, some investors are accusing the company and its bankers of playing the public for suckers, sharing pessimistic revenue projections with a few insiders but not average investors.”
Regulators are investigating whether investment bank and lead underwriter Morgan Stanley “selectively informed clients of an analyst’s negative report about the company before the stock started trading,” notes the article.
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