SAN FRANCISCO, May 25, 2012 /PRNewswire/ -- Hagens Berman Sobol Shapiro, an investor-rights law firm, today announced that it has filed a securities class-action lawsuit against Facebook, Inc. (NASDAQ: FB), officers, directors and underwriters of the company's Initial Public Offering (IPO) on behalf of investors relating to allegations of whisper estimates withheld from all but a few select investors.
The complaint, filed May 24, 2012, in the United States District Court for the Northern District of California, as Chang et al. v. Facebook, Inc. et al., case number 12-cv-2680, alleges that Facebook, Inc., Mark Zuckerberg, David A. Ebersman, David M.Spillane, Marc L. Andreesen, Erskine Bowles, James W. Breyer, Donald E Graham, Reed Hastings, Peter Thiel, Morgan Stanley & Co. LLC (NYSE: MS), J.P. Morgan Securities LLC (NYSE: JPM), Goldman, Sachs & Co. (NYSE: GS), Merrill Lynch (NYSE: BAC), Peirce, Fenner & Smith Incorporated and Barclays Capital Inc. (NYSE: BCS) violated Section 11, 12 and 15 of the Securities Act of 1933. The complaint can be accessed here.
Hagens Berman's investigation continues. "We anticipate the facts may warrant further claims also against several of these defendants, and additional selling shareholders for insider selling in violation of Section 20A of the Securities Exchange Act of 1934," said Hagens Berman partner Reed Kathrein. "While such claims are unusual, this is an extremely unusual situation to catch issuers and their bankers in what we have long suspected to be a hidden practice." The largest reported selling shareholders include Zuckerberg, Breyer, Accel Partners, DST Global Limited, Goldman Sachs, Tiger Global Management, Mail.ru Group Limited and Peter Thiel.
The deadline to move the court for lead plaintiff is July 22, 2012. Investors who purchased or otherwise acquired shares of Facebook common stock between May 18, 2012, and May 22, 2012 (the "Class Period"), and who have suffered substantial financial losses are encouraged to contact Hagens Berman Partner Reed Kathrein by calling (510) 725-3000. Investors may also contact the firm via email at FB@hbsslaw.com or by visiting www.hb-securities.com/Facebook.
Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.
Hagens Berman's lawsuit alleges that defendants violated federal securities laws by omitting material information in their registration statement and prospectus, and by selectively disclosing this material information to their premier clients and preferred investors prior to the IPO. Facebook allegedly privately pre-announced that its second quarter would fall short of analysts' estimates. Facebook allegedly only told their underwriters analysts and directed them to change their estimates which were then verbally conveyed to preferred clients. As a result, many of the underwriters' large clients said they would only buy at $32 per share. Knowing from research that many retail investors were willing to pay $43 per share, the lawsuit alleges that Facebook increased its allocation to retail investors to reach its $100 million goal at an offering price of $38 per share. The predictable happened. The stock shot up above $43, according to the suit, but without the demand from the large institutional investors who knew the estimate revisions, within three days Facebook's stock plummeted to around $32.00 per share.
The Senate Banking Committee and the House Committee on Financial Services are investigating the issues surrounding Facebook's IPO. On May 22, 2012, the Financial Industry Regulatory Authority and the Securities and Exchange Commission also announced they will review allegations of impropriety around Facebook's IPO.
Persons with knowledge that may help the investigation are encouraged to contact the firm. The SEC recently finalized new rules as part of its implementation of the whistleblower provisions in the Dodd-Frank Wall Street Reform Bill. The new rules protect whistleblowers from employer retaliation and allow the SEC to reward those who provide information leading to a successful enforcement with up to 30 percent of the recovery.
Hagens Berman Sobol Shapiro LLP is an investor-rights class-action law firm with offices in 10 cities. The firm represents whistleblowers, workers and consumers in complex litigation. More about the law firm and its successes can be found at www.hbsslaw.com. The firm's securities law blog is at www.meaningfuldisclosure.com.
Media Contact: Mark Firmani, Firmani + Associates, (206) 443-9357, Mark@firmani.com
SOURCE Hagens Berman Sobol Shapiro LLP