Facebook faces new lawsuit over IPO disclosures

This story originally appeared on CBSNews.com's sister site, CNET.com

(CBS News) - Facebook has been served with another lawsuit related to its IPO by investors who claim the company's executives and its bankers misled them by "selectively disclosing" material information about its revenue outlook.

The lawsuit (see below), which was filed Friday in U.S. District Court for Southern New York, is based on reports that, in the days before the public offering, the lead underwriter for the deal

Did Facebook underwriter spook investors before IPO?

for the company. The underwriters of the deal -- Morgan Stanley, JPMorgan Chase, and Goldman Sachs -- reportedly reduced their estimates because

Who downgraded Facebook's prospects? Maybe Facebook did

. That information was reportedly verbally conveyed to institutional investors but not to smaller investors.

In response to the legal action, a Facebook spokesperson said, "We believe the lawsuit is without merit and will defend ourselves vigorously."

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A

Facebook, Zuckerberg sued over IPO

in the same court.

Facebook, which reported in March that more than half its 900 million members were using mobile devices to access the network, updated its filings with the Securities and Exchange Commission in early May to say that the

Facebook amends IPO filing: Mobile a growing problem

was cutting into the prices it can set for advertisers, which would in turn hurt the company's revenue.

The lawsuit, which seeks class action status, points out that the revision to Facebook's prospectus warned that a reduction in advertiser spending could have an adverse effect on revenue. But, the lawsuit alleges, the company omitted the fact that it was already "experiencing a severe and pronounced reduction in revenue growth" due to a shift in Web site usage from traditional PCs to mobile devices.

Defendants failed to disclose in the Registration Statement and Prospectus that, during the roadshow conducted in connection with the IPO, certain Underwriter Defendants reduced their second quarter and full year 2012 performance estimates for Facebook. These reductions were material information which was not shared with all Facebook investors. Rather, this information was selectively disclosed by defendants to certain preferred investors, but it was omitted from the Registration Statement and Prospectus.

In addition to the lawsuits against Facebook, a Maryland investor is

Facebook IPO investor sues Nasdaq over trading delays

stock exchange over glitches in how it handled the offering.

Facebook securities lawsuit

[credibility2]

Zuckerberg used this insider tip off to sell and dump his stock before it began tanking, along with other select individuals who similarly took advantage of the tip to cut their losses. It was a ploy to dump and dupe others into buying the stock, thereby inflating the rush and profit for the select few, including Zuckerberg.

[bobnjersey]

[The underwriters of the deal -- Morgan Stanley, JPMorgan Chase, and Goldman Sachs -- reportedly reduced their estimates because a Facebook executive instructed them to. That information was reportedly verbally conveyed to institutional investors but not to smaller investors.]
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this is all currently legal ... and has precedent w/ many previous high profile ipo offerings.

[Skruffy1]

Gosh... a company being less than truthful in order to boost its stock??? That would never happen here in the Corporate States of America, would it?

[endrepubs]

Sounds like this lawsuit DOES have merit!

[matt6052]

They can't get the advertising component to work, and that means the only thing they can sell is a guilt-by-association score -- to credit agencies.

[nohater]

almost like fraud. wonder why the sec, the doj isn't investigating facebook and et al for criminality. if criminality exists, those responsible should be arrested, tried, and sentenced to prison if found guilty.