They say things happen more quickly in internet time. Just ask Mark Zuckerberg. Various sources are reporting that the Facebook CEO is being sued by the company’s shareholders after what the UK’s Daily Telegraph describes as “its disastrous IPO”.
According to the Telegraph, the lawsuit “accuses Zuckerberg, Facebook and several banks led by Morgan Stanley of hiding the company's weakened growth forecasts ahead of its $16bn initial public offering.” The report goes on: “The defendants are claimed to have concealed from investors during the IPO marketing process ‘a severe and pronounced reduction’ in Facebook revenue growth forecasts.” Morgan Stanley, the report goes on, has been accused of “failing to warn smaller investors of a more negative assessment of Facebook's future profits”.
Meanwhile, the Guardian reports that Robbins Geller, the law firm that won a $7bn settlement for Enron's shareholders, is pursuing Zuckerberg, his board and the long list of banks advising the company “for making ‘untrue statements’ about its financial performance”.
The paper reports that Robbins Geller is bringing the second class action law suit in as many days against Morgan Stanley, Goldman Sachs, Barclays and a host of Silicon Valley luminaries including PayPal guru Peter Thiel. A separate suit filed in California on Tuesday by investor Darryl Lazar claims that the social network's share prospectus contained "materially false and misleading statements".
Earlier today, the regulators also got involved, with Mary Schapiro, chair of the financial watchdog, the Securities and Exchange Commission, saying: "I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook."
The story is particularly interesting from a mobile perspective, as Morgan Stanley analyst Scott Devitt had previously reduced his estimate for Facebook’s revenue this year to $4.85bn from his initial estimate of more than $5bn, adding that the business faced multiple problems. Part of his reasoning was the increase in consumers accessing Facebook via mobile devices, an area where Facebook it still working out how to make money.
Facebook’s stock is currently trading at $31.85, 16 per cent down on the initial $38 launch price.