Tomahawk, WI 12/19/2013 (BasicsMedia) – Facebook Inc (NASDAQ:FB) may not find it easy in the coming months if a ruling by a U.S. District Judge in Manhattan which was made public this week is anything to go by. The judge Robert Sweet seems to agree with the plaintiffs in FB’s bungled IPO in May 2012 that the social networking company, the underwriter banks and the Nasdaq Composite Index should face IPO lawsuit.

The plaintiffs in the case are mostly institutional investors who claim that they were misled into investing in the company when it debuted in May 2012. The stock’s IPO fetched about $16 billion with a share selling at $38.

Soon after the debut, a technological hitch hit the company and its shares traded down than their IPO price and ended up hitting a low of $17.55 per share in Sept. 4, 2012. The investors in the case claim that besides the technological issues which hit Nasdaq and caused problems with the shares, FB and dozens of banks involved in the initial public offering of the stock concealed a lot of risks which may have contributed to the losses they suffered.

The investors are seeking for room to launch compensation claims against Facebook Inc (NASDAQ:FB) and underwriters in the IPO. The ruling which was made on Dec. 11, but only made public on Dec. 18, seems to be a rare victory for the plaintiffs given that other courts have turned down such proceedings.


The plaintiffs in the case include pension funds in California, North Carolina and Arkansas. They claim that had Facebook Inc (NASDAQ:FB) and the banks involved revealed material information about the company’s health and future projections, they would have avoided selling or holding onto a sliding stock which resulted in losses on their part.

As such, they are laying their case against FB CEO Mark Zuckerberg and banks such as Morgan Stanley (MS), JPMorgan Chase (JPM) and Goldman Sachs Group Inc (NYSE:GS). There are more than 40 institutions and individuals listed in the case as defendants.

On its part, Facebook Inc (NASDAQ:FB) has maintained that the proceedings lack in merit and it looks forward to full airing of the facts.

It could be easy to dismiss the case fleetingly, but if the proceedings continue and FB is found on the wrong side, the company could end up paying huge sums of money in compensation and this will have impact on its cash reserve.

Building for the future

At the moment, Facebook Inc (NASDAQ:FB) can be seen laying solid ground for its future. The company is repackaging advertisement offering so as to attract more revenue. It is currently testing auto-play video ads and if this is successful, it will be able to boost its revenue figures significantly. Prior to this new ad offering, FB had made tweaks in its website by adding high-quality news-feed and enabling users to see what devices their friends are using to access the service. These are seen to be intended at improving users experience on the platform and to ensure that users spend a lot more time on the network.

In another big move aimed at securing its future, Facebook Inc (NASDAQ:FB) is funding installation of Internet networks across the world in efforts to fully control its operations, drive down bandwidth cost and improve the quality of its services.

The stock is significantly up since its IPO troubles and is trading around $55.57 per share. Its market cap is now $135.33 billion, a far cry from $16 billion at the IPO in May 2012.

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