Facebook wins first IPO shareholder case

The company did not withhold certain projections from investors, a ruling said

Facebook has scored an initial legal victory in its IPO case following a federal judge's dismissal of a group of investor lawsuits filed against the company.

More than 30 lawsuits were filed against Facebook after it went public last May, alleging that the company shared business information with analysts who then shared the information with large institutional investors without disclosing it to the wider investing public.

Facebook, however, did make "extensive warnings" in its registration statement, drafts of the registration statement and in its final IPO documents about the health of its business tied to mobile trends, according to a ruling filed Wednesday in the U.S. Court for the Southern District of New York.

"Even if internal projections could be considered material to the IPO, [the plaintiffs] have not demonstrated that the Facebook projections would have 'significantly altered the total mix of information in the marketplace,' considering that these disclosures were publicly disseminated," the ruling said.

"Based upon our experience in the second quarter of 2012, to date, the trend we saw in the first quarter of [daily active users] increasing more rapidly than the increase in number of ads delivered has continued," Facebook said in its registration statement filed May 16 with the U.S. Securities and Exchange Commission, two days prior to its IPO.

The social network has come under pressure to increase its revenue as users flock to mobile devices, but advertisers maintain a stronger presence on the desktop. The company reported during its fourth-quarter earnings call that the number of daily mobile users had exceeded daily Web users for the first time ever, though its mobile business constitutes 23 percent of its total advertising revenue.

Facebook petitioned courts last June to consolidate the more than 30 lawsuits filed in connection with its IPO.

Wednesday's ruling addressed the first several IPO lawsuits, which have been classified as derivatives cases. The judge has yet to rule on the remaining class-action securities lawsuits, but Wednesday's ruling addresses the same core allegation related to disclosures.

Basically, the ruling shows that "companies don't have a duty to disclose their projections as part of their written IPO documents," said Facebook attorney Richard Bernstein. "The law has rejected for decades the contrary argument that Facebook plaintiffs have made," he said.

Plaintiffs have 20 days to replead the case. A briefing for the remaining IPO cases will be completed in mid-July; a decision is expected later in the fall.

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.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags Internet-based applications and servicesCivil lawsuitslegalsocial networkingsocial mediainternetFacebook

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 Articles

Resources

PCW Evaluation Team

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Armand Abogado

HP OfficeJet 250 Mobile Printer

Wireless printing from my iPhone was also a handy feature, the whole experience was quick and seamless with no setup requirements - accessed through the default iOS printing menu options.

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.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?