A fresh lawsuit has been filed against social networking giant Facebook Inc. (NASDAQ: FB). A Facebook shareholder is seeking to hold the CEO and founder Mark Zuckerberg, directors and officers responsible for the botched initial public offering, and subsequent damages.
Gaye Jones, who has filed the lawsuit against Facebook, charged that Company’s directors were fully aware of the declining revenue trend as more and more users were browsing its page through smartphones. Jones alleges that the information (declining revenue trend) was discriminatingly passed to IPO underwriters and big stakeholders even as others were kept in the dark.
The lawsuit demands to force the directors and other beneficiaries to churn out the money they made by selling a stock which they allegedly knew was overpriced.
“The defendants were unjustly enriched because they realized enormous profits and financial benefits from the IPO, despite knowing that reduced revenue and earnings forecasts for the company had not been publicly disclosed to investors,” said the plaintiff in a statement.
Shares of Facebook which were initially priced at $38 fell to $25 within a month after its IPO as investors and analysts began to question the social networking website’s growth rate amid declining trend in revenue per user, and slowing growth in users’ base, at that moment.
Ever since the IPO was made in May, which was marked by technical glitches on the NASDAQ Stock exchange, more than 50 investors have filed lawsuits against the company.
A proposed class action is being heard in federal court in Manhattan.
The lawsuit has been filed in the Court of Chancery against Facebook and three underwriters JPMorgan Chase Morgan Stanley, and Goldman Sachs.
All the three underwriters declined to comment over the matter while Facebook did not offer any immediate comment.