Facebook response to IPO lawsuits to focus on Nasdaq

Social network is expected to file a motion to consolidate a wave of investor lawsuits, addressing the stock exchange's role in the fumbled offering.

Facebook is expected to make its first public response as early as tomorrow to the wave of investor lawsuits regarding the company's lackluster IPO.

The social-networking giant is planning to file a motion to consolidate all the shareholder lawsuits pending against it, providing inside perspective on the role that the Nasdaq stock exchange's performance had on the stock's trading activity, a personal familiar with the matter told The New York Times. The IPO's lead underwriters -- Morgan Stanley, Goldman Sachs and JPMorgan Chase -- are also expected to join the motion, the paper reported.

Facebook representatives declined to comment on the report. CNET has also contacted Nasdaq for comment and will update this report when we learn more.

Soon after Facebook's stock began trading on May 18 at $42.05, shares tumbled to their $38 offering price. Shares have steadily declined about 30 percent since the IPO, leading to a wave of lawsuits from investors who claim the company's executives and its bankers misled them by "selectively disclosing" material information about its revenue outlook.

In the days before the public offering, the lead underwriter for the deal told major clients it was reducing its revenue forecast for the company. Morgan Stanley, JPMorgan Chase, and Goldman Sachs reportedly reduced their estimates because a Facebook executive instructed them to . That information was reportedly verbally conveyed to institutional investors but not to smaller investors.

Facebook, which reported in March that more than half its 900 million members were using mobile devices to access the network, updated its filings with the Securities and Exchange Commission in early May to say that the shift to smartphones and other mobile gadgets was cutting into the prices it can set for advertisers, which would in turn hurt the company's revenue.

However, Facebook's motion is also expected to place some of the blame for the IPO's flop at the feet of the Nasdaq stock exchange, which has already expressed regret over the decision to proceed with the blockbuster offering after a 30-minute delay in the IPO's opening contributed to confusion among traders. Traders complained they were not able to confirm changes or cancellations made to Facebook orders starting as early as 4:30 a.m. PT. Later on in the morning, some traders said they had not received confirmation from Nasdaq that transactions had actually been completed.

In response to demands for compensation for losses incurred by the snafu, Nasdaq submitted plans last week to offer up to $40 million to financial firms that lost money in the botched IPO.

 

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