Shareholders sue Facebook
NEW YORK – A group of shareholders has filed a lawsuit against Facebook, its executives and Morgan Stanley, the lead underwriter in the company’s IPO last Friday.
Meanwhile, Morgan Stanley will compensate investors who overpaid when they bought Facebook’s stock in Friday’s IPO, according to a source familiar with the matter.
The source said the firm is reviewing orders its retail clients placed for Facebook stock, and will make price adjustments if the clients paid too much. The person spoke on condition of anonymity because they were not authorised to discuss the matter publicly. The person did not say what amount constituted overpaying for Facebook’s stock.
The lawsuit comes as Facebook Inc stock started to climb on Wednesday after a two-day decline.The stock closed higher than the price at the start of trading yesterday, but it was still 14 per cent below the initial public offering price of US$38.
The lawsuit, filed in US District Court in New York, claims the company’s IPO documents contained untrue statements and omitted important facts, such as a “severe reduction in revenue growth” that Facebook was experiencing at the time of the public offering. The suit’s three plaintiffs claim they were damaged.
In a statement, Facebook said the lawsuit is without merit. Morgan Stanley declined to comment.
Meanwhile, a Senate panel said it was reviewing Facebook’s high-profile stock offering last week amid allegations that the bank handling the IPO may have provided select clients with a negative assessment of the company.
A Democratic aide to the Senate Banking Committee says the panel wants to learn more about the initial public offering. The committee seeks briefings with representatives of Facebook, regulatory agencies and others. The aide spoke on condition of anonymity because the committee’s planned inquiry hasn’t been publicly announced.
Regulators are examining whether Morgan Stanley selectively informed clients of an analyst’s negative view of Facebook’s prospects before the stock offering.