Lawsuits mount over Facebook IPO debacle

Trial lawyers smelled blood as furious investors began filing suits over losses on Facebook's disastrous $16 billion IPO, with billions of dollars possibly at stake in coming litigation.

More than a half-dozen law firms specializing in investor complaints said they were launching class action suits against the social networking giant and its underwriters.

The suits alleged that Facebook, and Morgan Stanley, Goldman Sachs and other big Wall Street banks that distributed the shares withheld from smaller investors crucial forecasts that pointed to weaker growth for Facebook, while sharing the information with big institutional clients.

A separate lawsuit against the Nasdaq exchange said its massive technical problems on the first day of Facebook trade on Friday also resulted in losses to investors.

All told the claims could come to billions: more than $15 billion dollars has been wiped from the company's value since the initial public offering gave it a market capitalization of $104 billion.

Facebook vehemently defended itself in its first public comment since the IPO, as the first suit, from the Brian Roffe Profit Sharing Plan and two other investors, was lodged in the New York District Court.

"We believe the lawsuit is without merit and will defend ourselves vigorously," a Facebook spokesperson said.

The class-action suits all said that US securities laws were violated when the company and its main IPO bankers allegedly provided information to large clients but not others.

They "failed to disclose that during the IPO roadshow, the lead underwriters... cut their earnings forecasts and that news of the estimate cut was passed on only to a handful of large investor clients, not to the public," said law firm Glancy Binkow & Goldberg.

On the same grounds the Massachusetts state government issued a subpoena for the lead underwriter, Morgan Stanley, over how it shared information ahead of the massive share sale.

Morgan Stanley is being blamed for cutting its own internal Facebook earnings forecasts even while supporting the company in increasing the size of the IPO by 25 percent to 421 million shares, and raising the issue price sharply to $38 a share.

Investors had hoped to turn quick and easy profits on the shares when they hit the market Friday, given the lengthy buildup and how previous IPOs by tech giants like Google and LinkedIn rocketed upward.

But the launch flopped, the price barely staying up above the $38 level in the first day of trade and then plunging 18 percent over the next two sessions.

The price rebounded slightly in trade Wednesday, climbing 3.2 percent to $32.00, but remained well below the $38 that the initial IPO investors paid.

The episode cast a dark cloud over what was supposed to be the brightest market opportunity for investors in years and over a company with nearly one billion users but which still faces questions on whether it cares what investors think.

"The Facebook debacle is coming off as an insult to individual investors. It looks like the worst of Wall Street hype with a dose of chicanery to boot," said Dick Green at Briefing.com.

"Insiders certainly look like the winners and individual investors the losers."

On Tuesday Morgan Stanley insisted it followed all appropriate procedures in the IPO, including disseminating the update Facebook filing, the "S1", to all of the company's institutional and retail investors.

"In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information," the banks said in a statement.

As the lawyers took action in the courts, major retail brokers said they were trying to sort out investor complaints of losses due to Nasdaq's inability Friday to process trading orders correctly.

"We understand that Nasdaq is working with federal regulators to determine what, if any, accommodation might be made," Fidelity, the giant retail broker, told its clients, hinting that some compensation for losses might be available.

Regulators were also reported examining what happened with the underwriters, and the banking committee of the US Senate was also informally gathering information on the case.

"If true, the allegations are a matter of regulatory concern to FINRA and the SEC," Rick Ketchum, the chief executive of the Financial Industry Regulatory Authority, said in a statement.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • The ‘All You Need’ 2015 Isuzu D-MAX launched
    The ‘All You Need’ 2015 Isuzu D-MAX launched

    Isuzu Philippines Corporation (IPC) just recently introduced the 2015 Isuzu D-MAX pick-up truck at the Clark International Raceway to show that their pick-up model can conquer any kind of terrain.The high-end LS variant and standard LT 4x4 is now equipped with a more powerful engine, the 4JK1-TC (Hi) 2.5-liter engine which with Common Rail Direct Injection and an intercooled Variable Geometry System (VGS) turbocharger. IPC also introduced a new standard ride variant, the LT-X 4x2 manual …

  • Limited Edition Honda CR-V and Jazz now available
    Limited Edition Honda CR-V and Jazz now available

    If you’ve always wanted to be part of an exclusive group of car owners, now might be the time for you to consider getting a Honda CR-V or Jazz.  Honda Cars Philippines Inc. (HCPI) just came out with their limited edition All New Jazz and New CR-V. …

  • ToyotaPH hit its highest monthly sales last March
    ToyotaPH hit its highest monthly sales last March

    Toyota Motors Philippines hit its highest monthly sales to date last March, registering 10,237 units sold.  This recent CAMPI report puts Toyota’s market share at 43.5% last month. …

  • VolkswagenPH launches Child Safety Initiative
    VolkswagenPH launches Child Safety Initiative

    Volkswagen Philippines just  launched the VW Child Safety Initiative (CSI) campaign which aims to support child safety on Philippine roads at the just concluded Manila International Auto Show (MIAS). The World Health Organization’s road safety facts show about 1.24 million die each year globally as a result of vehicle related accidents. Child restraint systems like child seats and booster seats also reduce risk for children by about 70% for infants and upto 80% for small children. This …

  • Pacquiao pleads for Indonesia to spare death row Filipina
    Pacquiao pleads for Indonesia to spare death row Filipina

    World boxing superstar Manny Pacquiao took time out Monday from final preparations for his $400 million megafight with Floyd Mayweather to plead for the life of a Filipina on death row in Indonesia. Pacquiao, a national hero in the Philippines, added his voice to a chorus of global opposition led by United Nations Secretary General Ban Ki-moon to the executions of a group of eight foreign drug convicts, including compatriot Mary Jane Veloso. The eight-division world champion, who will face …

  • Thousands beg Australia not to deport autistic Filipino boy
    Thousands beg Australia not to deport autistic Filipino boy

    A 10-year-old autistic Filipino boy made an emotional plea Monday for permission to stay in Australia, as tens of thousands called for him not to be deported despite the potential cost of his condition. Tyrone Sevilla, who arrived in Australia from the Philippines legally as a two-year-old with his mother Maria Sevilla, has written to Immigration Minister Peter Dutton asking to stay. The letter, which reads: "Dear Mr Dutton, can I stay in Australia please... Tyrone," was the first one her son …

  • Indonesia to look into condemned Filipina's case: Philippines
    Indonesia to look into condemned Filipina's case: Philippines

    Indonesian President Joko Widodo is "sympathetic" about the plight of a Filipina facing death for drug trafficking and has promised to look into her case, a spokesman for Philippine President Benigno Aquino said Monday after he made a personal appeal. While the comments seemed to indicate a faint prospect of reprieve for Mary Jane Veloso, the Indonesian leader is seen as extremely unlikely to change course on the executions which he has insisted for months are essential to halting a national …

  • Halt Indonesia drug executions until graft claims probed: Australia
    Halt Indonesia drug executions until graft claims probed: Australia

    Australia urged Indonesia Monday to ensure the trials of two men sentenced to death on drugs charges were corruption free before their executions go ahead, as family members readied to say their last goodbyes. "Bali Nine" drug traffickers Myuran Sukumaran and Andrew Chan could face the firing squad within days, along with others from Brazil, Nigeria, the Philippines and an Indonesian prisoner. Foreign Minister Julie Bishop spoke to her Indonesian counterpart Retno Marsudi on Sunday evening, …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options