Facebook prevails in shareholder lawsuit over IPO

The ruling looks to be the last nail in the coffin for suits filed in 2012

Facebook chief Mark Zuckerberg, speaking March 4, 2015, during a public Q&A in Barcelona, Spain.

Facebook chief Mark Zuckerberg, speaking March 4, 2015, during a public Q&A in Barcelona, Spain.

An appeals court has ruled that shareholders cannot sue Facebook or Mark Zuckerberg in a case that accused the company of withholding key financial information from the public until after its IPO.

The shareholders alleged that Facebook had failed to share its projections for mobile ad sales prior to the offering, disclosing them only to analysts who then relayed the information to certain investors.

The plaintiffs complained that Facebook's stock was "hammered" after it went public and the market learned of the lower forecasts. Facebook's shares opened at just over US$42 on the Nasdaq on May 18, 2012, and fell to the low $30-range in the ensuing days. The stock has since risen strongly, trading at around $96 on Friday.

In his decision, Circuit Judge Dennis Jacobs said that because the shareholders weren't owners of Facebook stock at the time the sales information wasn't disclosed, they had no legal standing to sue.

In so-called derivative litigation, "a proper plaintiff must have acquired his or her stock in the corporation before the core of the allegedly wrongful conduct transpired," the judge said, and none of the plaintiffs satisfied that requirement.

Geoffrey Johnson, an attorney for the plaintiffs, declined to comment.

Facebook spokeswoman Vanessa Chan said the company was pleased with the ruling.

The ruling affirms an earlier decision from the District Court in Manhattan, which dismissed plaintiffs' claims partly on the same grounds. It also comes after the U.S. Securities and Exchange Commission dropped its own investigation into the matter roughly a year ago.

Facebook's IPO was also marred by technical problems, and in April the Nasdaq paid $26.5 million to settle a class action lawsuit over a a glitch that delayed trade notices.

Facebook has since become successful in making money from ads on mobile devices, which is where the company makes the bulk of its revenue.

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com

Join the PC World newsletter!

Error: Please check your email address.

Tags business issuesInternet-based applications and servicesfinancial resultssocial mediainternetFacebook

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Zach Miners

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?