Shareholders sued Facebook and Mark Zuckerberg following for allegedly hiding the social media company’s weakened growth forecasts ahead of its $16 billion initial public offering (IPO), according to Yahoo! finance.
The lawsuit claimed that Facebook, Zuckerman, and co-defendants Goldman Sachs and JPMorgan Chase concealed “a severe and pronounced reduction” in revenue growth forecasts resulting from greater use of Facebook’s mobile app or website through mobile devices. It also accused Facebook of telling its bank underwriters to “materially lower” their forecasts for the company. The lawsuit said the underwriters disclosed the lowered forecasts to “preferred” investors only, instead of all investors.
According to the article, Reuters reported that Facebook advised analysts for its underwriters to reduce their profit and revenue forecasts during its IPO road show. It also said that underwriters cut their forecasts after the May 9 prospectus was filed but that these cuts were not publicly revealed before the IPO.
The lawsuit styled Brian Roffe Profit Sharing Plan et al v. Facebook Inc et al, filed in the U.S. District Court, Southern District of New York, Case No. 12-04081, seeks class-action status, compensatory damages, and other remedies.