Legal Proceedings to be carried out against Facebook over IPO issue

May 18, 2012 was marked as a big day for Facebook. Mark Zuckerberg , surrounded by a large group of cheering employees rang the opening bell of the Nasdaq from Facebook headquarters in Silicon Valley. Yes, the website that was born 8 years ago in a dorm room had made its debut in the stock market. But the happiness was short lived. Barely the social networking giant had started celebrating; its precious founder was sued over the company’s IPO issue.

It all started when Facebook’s shareholders called for legal proceedings against Facebook Inc and several banks led by Morgan Stanley for hiding the website weakened growth forecasts ahead of its $16 billion initial public offering. Facebook’s stock, which opened at about $38 per share on the first day dipped by more than 18 percent on the third day and Morgan Stanley, the bank in charge of the IPO was called for investigation over possible securities fraud.

Shareholders complained that at the time of IPO Facebook was experiencing a severe reduction in revenue growth due to an increase of users of its Facebook app or website through mobile devices rather than a traditional PC. Due to this very reason Facebook Inc. informed underwriters to lower their business forecasts for its website during the IPO process but the changes were “selectively disclosed by defendants to certain preferred investors” and not to the public in general.

Hence, the shareholders brought the lawsuit against Facebook Inc, its founder in particular and banks associated with it. The lawsuit has been filed in the U.S. District Court in Manhattan.

Representatives of Facebook and Morgan Stanley refused to comment on the topic. To read more about the complaint visit