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Facebook getting sued after IPO difficulties

Facebook gets hit with around 50 lawsuits over its botched IPO back in May

By Trace Hagan from Sep 26, 2012 @ 8:51 CDT

Facebook has been hit with around 50 lawsuits that all relate back to their flopped IPO. In addition to these 50 lawsuits, securities lawyers who are representing Facebook investors are expecting hundreds of arbitration claims against brokers and securities firms who sold shares of Facebook for the IPO.

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"IPOs are the most attractive kind of suit for the plaintiff's bar," said John Coffee, a law professor at Columbia University. Coffee estimates that at least one-third are thrown out, but many of the rest conclude in settlements that amount to around 2 to 3 percent of the alleged losses. It appears Facebook could be shelling out quite a bit of money.

The main issue in most of these cases centers on the allegation that investors weren't warned enough in disclosures that Facebook's growth and revenue was taking a hit from users switching to mobile devices. Both Facebook, its underwriters, and the Nasdaq are facing quite a bit of legal exposure in these lawsuits. We'll be sure to keep you updated on how they are progressing.

NEWS SOURCES:Online.wsj.com


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