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Investors Sue Facebook Over Failure to Disclose Analysts' Forecasts

Source: WSJ

Posted on 23 May 2012 by Neilson

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Facebook lawsuitThree Facebook Inc. investors filed a civil lawsuit Wednesday in Manhattan federal court, alleging the company and its underwriters failed to properly disclose changes to analysts' forecasts made at the underwriting banks.

The suit follows reports that analysts at Morgan Stanley and Goldman Sachs Group Inc. ut their revenue forecasts on Facebook amid the investor roadshow, a change that wasn't widely disseminated.

Wednesday's investor suit, which also is seeking class-action status, alleges the changes made to Facebook's offering document, which said that mobile-user growth could slow revenue growth, didn't accurately portray the impact on Facebook's revenue growth.

The analyst opinions, which were published based on that updated offering document, would have revealed the "material information" but was "selectively disclosed," the suit alleges, citing news stories from Business Insider and Reuters as evidence.

In a statement Tuesday, a Morgan Stanley spokesman said the company "followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations."

Morgan Stanley wasn't immediately available for comment.

A spokeswoman for Facebook declined to comment.