A Facebook Inc. shareholder filed a lawsuit over the largest social networking company’s botched initial public offering and is seeking to hold Chief Executive Mark Zuckerberg, directors and officers responsible for the damage.
The lawsuit by Gaye Jones alleges that the company’s directors knew that Facebook did not disclose weaker revenue trends as more users accessed the website through mobile devices. The complaint alleges that information had been selectively shared with the company’s IPO underwriters and key investors.
The lawsuit seeks to force the directors and other defendants to disgorge the money they made from selling stock through the IPO which they allegedly knew was overpriced.
“The defendants were unjustly enriched because they realized enormous profits and financial benefits from the IPO, despite knowing that reduced revenue and earnings forecasts for the company had not been publicly disclosed to investors,” said the complaint.
Soon after the May IPO, which was also marked by technical glitches on the NASDAQ exchange, more than 50 investor lawsuits were filed. A proposed class action is being heard in federal court in Manhattan.
Jones’ lawsuit is a derivative case, meaning the investor seeks to step into the shoes of the company and any money recovered from Zuckerberg and others would be paid to Facebook, not shareholders.
Four previous derivative cases were dismissed last month, in part because U.S. District Court Judge Robert Sweet in Manhattan found the shareholders did not own the stock when the alleged misconduct took place prior to the IPO.
Sweet said in dismissing the previous lawsuits that Facebook had “repeatedly made express and extensive” warnings about the increased use of mobile applications.
Unlike the previous derivative plaintiffs, Jones has owned Facebook stock since February 2012.
The lawsuit was filed in the Court of Chancery in Delaware, where Facebook is incorporated, and also named as defendants the IPO underwriters— units of JPMorgan Chase & Co, Morgan Stanley and Goldman Sachs Group Inc.
JPMorgan, Goldman and Morgan Stanley declined to comment. Facebook did not immediately respond to a request for comment.
The case is Gaye Jones v Mark Zuckerberg et al, Delaware Court of Chancery, No. 8375
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Richard Chang)