At least three class action lawsuits have now been filed stemming from Facebook’s May 17 IPO, and there are surely more to follow. The first to be filed (Goldberg v. Nasdaq) names Nasdaq – not Facebook – as a defendant and alleges that the exchange “badly mishandled” the IPO, damaging class-members “in a variety of ways.”
For example, some class members placed buy orders, and then placed timely cancellations of those orders when the market price declined. These class members were damaged when the cancellations were not promptly and correctly executed by NASDAQ, and instead the buy orders were executed after Facebook prices had declined in value, meaning those class members overpaid for their Facebook shares. Other class members were unable to determine if their buy orders had been executed. These class members did not know whether they owned Facebook shares, or at what price, and were accordingly unable to timely sell those shares, suffering losses.
Goldberg has been assigned to Judge Sweet.
The second (Brian Roffe Profit Sharing Plan v. Facebook, et al) is filed on behalf of a all individuals who purchased shares traceable to the IPO, and brings claims under Sections 11, 12 and 15 of the Securites Act against Facebook, the company’s CEO and CFO (Mark Zuckerberg and David Ebersman), members of the Facebook board of directors, and the “Underwriter Defendants” which include Morgan Stanley, JP Morgan, Merrill Lynch, Goldman Sachs and Barclays. That action alleges that material misrepresentations and omissions made in the Registration Statement and Prospectus concealed the financial reality at the time of the IPO:
Facebook was then experiencing a severe and pronounced reduction in revenue growth due to an increase of users of its F acebook app or website through mobile devices rather than a traditional PC such that the Company told the Underwriter Defendants to materially lower their revenue forecasts for 2012. And, defendants failed to disclose that during the roadshow conducted in connection with the IPQ, certain of the Underwriter Defendants reduced their second quarter and full year 2012 performance estimates for Facebook, which revisions were material information which was not shared with all Facebook investors, but rather, was selectively disclosed by defendants to certain preferred investors and omitted from the Registration Statement and or Prospectus.
That action seeks over $2.5 billion in damages and has been referred to Judge Sweet as possibly related to Goldberg.
Earlier today, two additional law firms issued press releases announcing that they too had filed on behalf of purchasers of Facebook stock, but no further information is currently available on those lawsuits.