Facebook and a number of banks are being sued by some of the social networking site’s new shareholders.
They are angry and have claimed that its weakened growth forecasts were hidden from them before the initial public offering of shares.
Trading was turbulent from the get go with the price of the hugely anticipated stock bouncing around all over the place in the first few days.
Investment adviser Hugh Johnson said many are now trying to unfriend Facebook: “You’re going through a process now where you have a lot of very substantial owners of Facebook, their confidence has been a little bit shaken, some of them are going to try to reduce their positions; so we’re going go through a grinding process of trying to eliminate the weak holders of Facebook.”
Morgan Stanley, the lead underwriter, is one of those being sued by shareholders who say it and other banks reduced their forecasts for Facebook’s second-quarter and full-year revenue, and only told some of their institutional investor clients. The banks deny any wrongdoing.
Law suits have now been filed in New York and California and two US financial regulators will review Facebook’s initial public offering.