The IPO underwriters and the social website Facebook on verge of a legal problem; lawmakers are sharpening their knives against Zuckerberg and his business empire. Law firm Robbins Geller Rudman and Dowd representing Facebook investors has filed a class action suit on their behalf against the company. Zuckerberg and Facebook are suspected of misleading investors; before the tech company came up with largest ever initial public offering in country’s history.
The law suit filed against the huge company and its underwriters is based on allegations of ‘false and misleading’ registration statement and prospectus they filed ahead of IPO; with the Securities and Exchange Commission.
Further, the investors suspect the tech company also failed to reveal that underwriters were told to reducing performance estimates of 2012 as its mobile apps are being used by more users; not generating advertising revenue(s).
David Rosenfeld, one of several Robbins Geller Rudman and Dowd partners described the case as strict liability instead of a fraud case. Rosenfeld further explained that suffering investors however have all the right in the world to hook Facebook, its board, signatories and underwriters; if any omission(s) or material false statement involved.
There are three named plaintiffs, purchasing common Facebook stock from the IPO and were thus ‘damaged thereby.’ A statement by a Facebook spokeswoman described the lawsuit filed in a federal New York court as ‘without merit’ and added the same will be defended by the company vigorously.
Things went wrong following a report by Reuters on Tuesday, telling that Morgan Stanley and other investment bank underwriter Goldman Sachs supporting the IPO, informed clients ‘beforehand’ about their reducing their earnings forecasts; for Facebook.