Facebook wins first IPO shareholder case

The company did not withhold certain projections from investors, a ruling said

Facebook has scored an initial legal victory in its IPO case following a federal judge's dismissal of a group of investor lawsuits filed against the company.

More than 30 lawsuits were filed against Facebook after it went public last May, alleging that the company shared business information with analysts who then shared the information with large institutional investors without disclosing it to the wider investing public.

Facebook, however, did make "extensive warnings" in its registration statement, drafts of the registration statement and in its final IPO documents about the health of its business tied to mobile trends, according to a ruling filed Wednesday in the U.S. Court for the Southern District of New York.

"Even if internal projections could be considered material to the IPO, [the plaintiffs] have not demonstrated that the Facebook projections would have 'significantly altered the total mix of information in the marketplace,' considering that these disclosures were publicly disseminated," the ruling said.

"Based upon our experience in the second quarter of 2012, to date, the trend we saw in the first quarter of [daily active users] increasing more rapidly than the increase in number of ads delivered has continued," Facebook said in its registration statement filed May 16 with the U.S. Securities and Exchange Commission, two days prior to its IPO.

The social network has come under pressure to increase its revenue as users flock to mobile devices, but advertisers maintain a stronger presence on the desktop. The company reported during its fourth-quarter earnings call that the number of daily mobile users had exceeded daily Web users for the first time ever, though its mobile business constitutes 23 percent of its total advertising revenue.

Facebook petitioned courts last June to consolidate the more than 30 lawsuits filed in connection with its IPO.

Wednesday's ruling addressed the first several IPO lawsuits, which have been classified as derivatives cases. The judge has yet to rule on the remaining class-action securities lawsuits, but Wednesday's ruling addresses the same core allegation related to disclosures.

Basically, the ruling shows that "companies don't have a duty to disclose their projections as part of their written IPO documents," said Facebook attorney Richard Bernstein. "The law has rejected for decades the contrary argument that Facebook plaintiffs have made," he said.

Plaintiffs have 20 days to replead the case. A briefing for the remaining IPO cases will be completed in mid-July; a decision is expected later in the fall.

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com

Join the newsletter!

Or
Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags social mediainternetFacebooklegalsocial networkingInternet-based applications and servicesCivil lawsuits

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Zach Miners

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?