REPORT: Facebook shareholders have filed a class action lawsuit against the social network, as well as underwriting banks including Morgan Stanley, over its first-day trading slide, the law firm Robbins Geller Rudman & Dowd announced this morning.
The suit alleges that Facebook hid “a severe and pronounced reduction” in revenue forecasts from its investors, due to a more widespread use of Facebook via mobile devices. Yesterday, Reuters reported that some investors were shocked when lead underwriter Morgan Stanley reduced its revenue forecasts of the company shortly before Facebook’s IPO, supposedly following an amendment to its S-1 filing on May 9 over increased mobile risk.
Even more scandalous, Business Insider’s Henry Blodget reported last night that a Facebook executive actually told the underwriting banks to cut their estimates, but didn’t share that information with smaller investors. If true, Facebook could be on the hook for violating securities laws.
READ REPORT HERE