Social Network Facebook is being sued for non-disclosure of information about the company’s probable profits decrease for Q2.
The news for Facebook social network is not improving. At first, it was company’s IPO that has not entirely satisfied all expectations (still, it has made many people rich). Then there was the news about $15 bln. lawsuit against Facebook for tracking its users activity in the internet. Such news as, that IPO underwriters (banks) had to interfere the trading on Friday in order to prevent stock falling below $38 per share, has also appeared. The reason was in demand decrease comparing to the very one that was expected.
On Monday and Tuesday Facebook stocks fell below the mark of $38 per share, erasing approximately $40 bln. in market value. On Wednesday Facebook was sued by shareholders for concealment of company’s expected profits decrease for Q2, 2012 ($1.11 bln. against $1.17 bln. if roughly to count). There was information about company’s profits decrease comparing to the social network users amount increase. It was also reported that the amount of users who enter Facebook social network from mobile gadgets will increase and Facebook is not able to display ads on smartphones and tablets yet.
Perhaps, only a certain number of investors (major, biggest) was informed about company’s probable profits decrease. According to the news service Business Insider, this information was not open to all investors. It is reported that Facebook has recommended big banks involved in the IPO to lessen their expected income. Clearly, such behavior before IPO is not just strange but unprecedented.
Such information could have caused swing in shares demand. At the same time this information was indirectly reflected in an amended S-1 filing but the reasons of such conclusion was not openly clarified to the investors.
The fact of partial information sharing has caused the lawsuit against Facebook and Mark Zuckerberg because it violates some SEC regulations. That’s why SEC (Securities and Exchange Commission) and FIRA (Foreign Investment Review Agency) investigates all facts now.
The consequences of this IPO-scandal, of course, will be reflected on the Facebook attractiveness for some time. The shareholders lawsuit, perhaps, will also have certain worth, but NASDAQ will hardly be able to recover lost ground.