Hey there, time traveller!
This article was published 8/6/2012 (2746 days ago), so information in it may no longer be current.
TORONTO — A class-action lawsuit has been launched in Canada claiming Facebook misled most of its investors ahead of its initial public offering last month.
The suit, led by Regina-based lawyer Tony Merchant, alleges the social-media company worked together with its banks to distribute incomplete and inaccurate financial information to all but a few preferred investors.
A claim has been filed with the court in Saskatchewan, while one will be filed in Ontario on Monday and another in British Columbia later next week.
The documents filed in Saskatchewan allege a group of 20 bank analysts, including underwriters Morgan Stanley, Goldman Sachs and J.P. Morgan, were privy to insider information.
The claim alleges in April, an exclusive group of bank analysts was briefed on revenue expectations for both the second quarter and full year — information that was never made public.
About a month later, Facebook informed the group revenue would come in at the lower end of the forecast that had been provided to them earlier, the claim states.
"The underwriter defendants only disclosed this secret information to certain selected clients, thus curtailing demand for Facebook shares in the IPO," the document said.
"This enabled these selected clients to benefit from insider knowledge to avoid purchasing shares of Facebook at inflated prices or to short Facebook's shares to the detriment of other investors."
The allegations have not been tested in court.
In the U.S., Facebook, along with the investment banks that led the IPO, is the subject of at least two shareholder lawsuits. They allege analysts at the large underwriting investment banks cut their financial forecasts for Facebook just before the IPO and told only a handful of clients. Morgan Stanley has declined to comment. Facebook calls the lawsuits "without merit."
Facebook Inc. began trading publicly in mid-May following one of the most anticipated stock offerings in history.
The initial public offering of stock was priced at US$38, at the top of a projected range Facebook had already boosted just days earlier.
Since the IPO, the stock has been down on nine trading days and up on five. Facebook's stock price has gone as low as $25.52 since the IPO.
— The Canadian Press