Facebook to face class action lawsuit due to poor IPO showing

Facebook’s wishes to defend itself against one consolidated case has been granted. The social networking behemoth will now face a legal battle in Manhattan, New York against dozens of lawsuits over its failed initial public offering.

There are estimated 50 lawsuits filed against the social network, Nasdaq exchange, and Facebook’s underwriters. A panel of federal judges have decided that all of these cases will be collected throughout the United States as one and transferred to a district court in Manhattan headed by Judge Robert Sweet.

Reuters reports today that Facebook was pleased with the announcement and is making plans to defend itself “vigorously”. Last June, Facebook filed a motion asking that the lawsuits be taken as a single case.

The bungled IPO last May fueled the lawsuits after Facebook’s Nasdaq stock price opened at $38 but then never recovered from a dive. The company’s stock price closed today at $21.95, a far-fetched price when the IPO was opened. The defendants in the lawsuits, most of whom are investors, argue that Facebook did not disclose in the days immediately before the IPO that a downhill revenue growth had been forecasted.

Facebook denies it is at fault but blames Nasdaq charging, citing it as the main reason why the share price declined. The CEO of Nasdaq remarked about the claims by pointing at the “arrogance” and “overconfidence” among the staffers of the stock exchange, resulting to the mishandling of the IPO.

Investors claim that they lost their money after Nasdaq stock market suffered technical glitches. They accuse Facebook of providing only unflattering information about some of its business prospects to analysts in Wall Street, who in turn, shared them to privileged investors.

According to Reuters, the lawsuits did not yet specify the damages being sought but the amount could easily reach in millions of dollars for the social network in legal fees alone.

source: CNET

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