Facebook Sues Zuckerberg
Plaintiff alleges that Zuckerberg, Peter Thiel and James Breyer benefited from withholding information from the Securities and Exchange Commission Registration Statement that the company was worth less because increased use of its website through mobile devices was causing a “serious reduction in revenue growth,” since “advertising was not as effective on mobile devices as it was on a traditional personal computer, therefore alienating Facebook’s customer-base.
“This negative trend … was so serious that, during a road show preceding Facebook’s IPO, its lead underwriters- Morgan Stanley & Co. LLC, (“Morgan Stanley), JPMorgan Securities LLC (“JPMorgan”), and Goldman Sachs & Co. (“Goldman Sachs”) all reduced their revenue forecasts for the company. This highly unusual move was not made available to the market in general, but was selectively disclosed to certain of the underwriters’ large investor clients, thereby keeping the public in the dark.”
“These improper statements have devastated Facebook’s credibility as reflected by the company’s $15.3 billion, or nearly 20 percent, market capitalization loss,” continues the complaint. The company also faces eight class actions for violations of federal securities laws, as a result, the complaint states.