Minggu, 27 Mei 2012

Britons to join legal action against Facebook after float chaos

Britons to join legal action against Facebook after float chaos

By Simon Watkins

PUBLISHED: 08:23 EST, 27 May 2012 | UPDATED: 08:23 EST, 27 May 2012

British investors are set to join the claimants seeking billions of pounds from Facebook and its bankers after the chaotic flotation of the social networking company.

Lawyers who launched a legal action against Facebook, its executives and advisers told Financial Mail they had received approaches from UK investors keen to join the class action.

David Rosenfeld, partner at Robbins Geller Rudman Dowd in New York, said his firm had been contacted by hundreds of investors from around the world.

First day: Facebook founder Mark Zuckerberg rang the Nasdaq's opening bell on the day the company floated

First day: Facebook founder Mark Zuckerberg rang the Nasdaq's opening bell on the day the company floated

The case highlights a growing trend in the US for stock market flotations to become the subject of litigation.

According to legal consultant Cornerstone Research, almost one in five initial public offerings in America lead to class action law suits by investors.

Discount voucher firm Groupon has slumped 16 per cent since it listed on Nasdaq in November and is the subject of a claim from investors alleging that it misled the market about its prospects.

Facebook shares were issued at $38 (£24) on May 18, valuing the group at $104 billion (£67 billion), but have fallen to below $32.

About $24 billion of shares were sold, with the rest held by Mark Zuckerberg and other founders, which means the drop cost subscribers $3.85 billion.

The law suit names Facebook, Zuckerberg and other executives, and Facebook’s banks, including lead underwriter Morgan Stanley.

After issuing its prospectus on May 3, Facebook released a public update on May 9, warning that growing use of mobile devices to access the internet might hurt its revenues.

This was widely reported as a ‘profits warning’.

The lawsuit says that Facebook briefed analysts at its adviser banks, which t hen lowered earnings forecasts.

However, this revision was allegedly passed to just a few select investors. Rosenfeld said: ‘Their duty was to put that information in the prospectus to all investors.’

Morgan Stanley was constrained by US law, which forbids analysts from issuing any research in the run-up to a flotation, other than orally.

Sources confirmed that analysts from Morgan Stanley did contact some clients to discuss the information.

A spokesman said: ‘Morgan Stanley followed the procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all regulations.’

Facebook said the legal claim was ‘without merit’ and that it would defend itself vigorously.

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