Facebook, Nasdaq and IPO underwriters to face lawsuits

Dec. 19, 2013 at 2:24 PM
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NEW YORK, Dec. 19 (UPI) -- Facebook, financial underwriters to its public debut and Nasdaq must face lawsuits over its botched first day as a public company, a judge in New York ruled.

In one lawsuit, plaintiffs argue that Facebook made misleading statements before its initial public offering, the Courthouse News Service reported Thursday.

Facebook said in advance of its IPO that increasing use of mobile devices "may negatively affect," the company's revenue.

In his ruling, U.S. District Judge Robert Sweet in New York said Facebook "was aware of the material negative impact on Facebook's revenues the company had suffered as a result of increasing mobile usage and the company's product decision 10 days before the IPO."

"Plaintiffs have sufficiently pleaded material misrepresentation(s) that could and did mislead investors regarding the company's future and current revenues," said Sweet in an 83-page ruling released Wednesday.

The case against Nasdaq involves statements it made regarding the reliability of the exchange before technical glitches on the day of the IPO derailed by sell orders.

During Facebook's debut in May, share prices started the day at $38 per share, which moved up to $45 before dropping to $31 by the end of the day.

"Just as a misstatement a company's primary product affects an investors decision to purchase that stock, Nasdaq's failure to correct flawed information about its technology capabilities could have impacted plaintiffs' decision to participate in Facebook's offering and ability to trade during that offering," Sweet wrote in a separate ruling.

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