Facebook Inc (NASDAQ:FB) will have to face group lawsuits over IPO alleging that the social networking company purposely inflated the price of its shares before their flotation in the market in 2012. The company has action lawsuits filed by two shareholders individually which was clubbed into one group when the federal judge told them to pursue the respective claims together.
Facebook accused of duping investors
The federal judge gave the two lawsuits clearance to proceed ahead in the country. According to investors, the company did not divulge any information related to the unexpected growth of its shares ahead of $100bn IPO, which was considered as one of the biggest for any technology firm. However, months later the shares of Facebook came down to almost half due to several features such as mobile advertising causing anxiousness among the investors.
Even though the shares have recovered, the investors still are feeling duped and are claiming that the projections by Facebook completely ignored the factors that could pull down its stock prices prevailing at that time, and the investors were cheated into overpaying for them. The company’s shares floated at $38/share in May 2012 and by September 2012 had crashed down to $18 when Facebook revealed that numerous people use mobile phones for accessing Facebook.
Showing advertisements on mobile is much difficult, and the companies who use Facebook as a platform for advertising their products expect people to reach them through their computers. When Facebook Inc (NASDAQ:FB) revealed that more and more people are also now accessing the social site through mobile devices, the share prices crumbled causing the investors to lose hugely. Manhattan’s US District Judge, Robert Sweet, has accepted two lawsuits against the company that will enable the institutional and retail investors who seem to have lost their money to claim it.
Immediately, after the certification of these two lawsuits, numerous plaintiffs throughout America came forward to file a lawsuit alleging the inadequacy of pre-IPO from Facebook.
