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MENAFN - ProactiveInvestors - UK - 24/05/2012

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(MENAFN - ProactiveInvestors - UK) Newly-listed social network Facebook (NASDAQ:FB) is facing several lawsuits claiming that information was hidden from shareholders regarding the company's weakened growth forecasts ahead of its 16-billion initial public offering (IPO) last week.

After enjoying a slight rebound in its beleaguered stock Wednesday morning, reports began trickling out that certain Facebook executive officers and directors, including CEO Mark Zuckerberg, as well as the underwriters of the IPO, are being sued by shareholders.

One filed complaint alleged that "the offering materials provided to potential investors were negligently prepared and failed to disclose material information about Facebook's business, operations and prospects, in violation of federal securities laws."

"The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result," said another complaint.

Along with multiple class action lawsuits filed on behalf of shareholders in New York and California, top security regulator, the Massachusetts Secretary of Commonwealth, has also issued a subpoena to the investment bank leading the IPO - Morgan Stanley (NYSE:MS).

The subpoena comes after allegations that the bank's analysts "selectively informed" investors about lowered expectations for Facebook's 2012 revenues before the stock started trading.

The chairman of the Financial Industry Regulatory Authority said regulators plan to review allegations that such information was shared only with certain investors.

Morgan Stanley has said that revised analyst views were taken into account in setting the stock offering price at 38 per share.

Facebook, working with Morgan Stanley, first set a range of 28 to 35 for the offering price, then raised the range to 34 to 38, before setting it at 38 on the night before the May 18 IPO.

According to reports from Reuters, Facebook itself had urged analysts working for some of the 33 underwriters to lower their estimates ahead of the IPO.

The company had issued a revised prospectus on May 9 in which it cautioned about the possible negative impact of Facebook users shifting to mobile platforms.

Since its market debut last week, Facebook has seen its shares decline sharply, on an IPO price that many say may have been too aggressive.

The stock closed its first day on the market amid a technical glitch with a gain of just 0.6 per cent, at 38.23. The social network raised 16 billion in its first day on the market on Friday, completing the largest tech-sector IPO on record, which was said to have largely overestimated demand.

Nasdaq OMX chief executive Bob Greifeld said to reporters on Sunday that he was "humbly embarrassed" by the delay in the opening of Facebook's initial public offering for trading.

Greifeld has since been in talks with regulators over potentially millions of dollars worth of customer disputes.

The stock exchange group said earlier this week that it would put aside at least 13 million for traders and investors that were affected by the exchange's order-cancellation issues.

Friday's IPO saw Zuckerberg, who developed Facebook from his bedroom at Harvard university, become one of the richest people on the planet.

Fellow founders Dustin Moskovitz and Eduardo Saverin have also become paper-billionares, along with Napster founder and former employee Sean Parker.

Facebook's shares were up 4.36 percent Wednesday morning, trading at 32.35. The stock is down more than 23 percent since it listed last Friday.

Morgan Stanley shares were down 1.8 percent in New York.

 






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