Plaintiffs named in suit over Facebook's troubled IPO

Dozens of class-action lawsuits have been filed against the social network, and now a judge has named several state pension funds as head plaintiffs to lead the charge against the company.

A U.S. judge has named the lead plaintiffs in the dozens of class-action lawsuits brought against Facebook over its bungled initial public offering, according to Reuters.

District Judge Robert Sweet has been assigned 42 cases against the social network, which he consolidated in October . Today he picked a handful of plaintiffs to head the suits. The lead plaintiffs include several state pension funds, such as the North Carolina Retirement Systems, Arkansas Teacher Retirement System, the Fresno County Employees' Retirement Association, and Banyan Capital Master Fund. Collectively, this group claims a combined loss of $7.1 million.

"Its members are large, institutional investors with experience representing shareholder classes in similar litigation with the resources to pursue the action," Sweet told Reuters.

Typically when judges pick lead plaintiffs in class-action lawsuits, they will choose those with the biggest losses, according to Reuters. However, judges can also select a different investor if it seems appropriate.

Facebook became embroiled in this extensive legal battle shortly after its $16 billion IPO in May. The company's stock opened on the Nasdaq priced at $38 a share and, aside from a slight uptick right at the start, has plummeted since then. Shares closed today at $26.97 apiece. Defendants in the lawsuits, many of whom are investors, claim Facebook failed to disclose in the critical days leading up to the IPO that there was "a severe and pronounced reduction" in forecasts for Facebook's revenue growth.

Facebook has maintained that it's innocent of wrongdoing and instead placed the blame on Nasdaq , charging that system glitches on the first day of trading were the source of the decline in share price. Nasdaq's chief executive responded to these claims by saying that "arrogance" and "overconfidence" among the stock exchange's staffers contributed to Facebook's mishandled IPO.

Judge Sweet also named plaintiffs for class-action lawsuits against Nasdaq today. The plaintiffs claim that the company did not properly carry out orders to buy and sell Facebook shares on the first day of trading. The co-lead plaintiffs include First New York Securities, T3 Trading Group, and Avatar Securities, according to Reuters. Apparently, on the day of the IPO, these companies traded a combined $316 million in Facebook shares.

A Facebook representative told CNET that the company is declining to comment on the lawsuit at this time. CNET also contacted Nasdaq for comment and we'll update the story when we get more information.

About the author

Dara Kerr is a staff writer for CNET focused on the sharing economy and tech culture. She grew up in Colorado where she developed an affinity for collecting fool's gold and spirit animals.

 

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