BY GINA G. SCALA
Discontented Facebook investors are holding founder Mark Zuckerberg responsible for the social media company’s dismal IPO, claiming in a new class action lawsuit he was privy to insider information about the stock being overvalued.
Filed by Facebook investors June 1 in the US District Court of Southern New York, the lawsuit alleges head of the multi-billion dollar IPO and the banks overseeing the float informed major clients that they were reducing revenue estimates for the social network, The Digital Spy reported.
JP Morgan, Goldman Sachs, and Morgan Stanley all tipped off only the investors with the largest stake in the company about the serious undervalue of the stock well before the IPO, leaving everyone else who invested their hard earned dollars in the dust, WebProNews reported of the lawsuit filing.
Zuckerberg unloaded his shares to minimize his losses, the lawsuit claims, according to The Inquistir. Facebook’s stock fell slightly in morning trading Tuesday, losing 9 cents to $26.81. That’s down 29 percent from its initial public offering price of $38.
In fact, the Associated Press reported since Facebook Inc.’s stock began trading publicly May 18, it has fallen on seven of the 11 trading days.
“The estimates themselves are material information–the consensus of smart, well-trained analysts who have worked with the company’s management to develop realistic forecasts,” Henry Blodget, a former Wall Street analyst, said. “Most investors don’t even know that these estimates exist, let alone that they’re whispered verbally to only a handful of big investors. All potential investors should have easy access to these estimates, as well as to any logic underlying them. The SEC needs to change the rules here.”
The exact amount of stock Zuckerberg sold remains unknown, but rumors persist it’s around a billion dollars, WebNewsPro reported. The Facebook founder has lost more than 25 percent of his wealth since selling off his shares.
Also this week, the social media network is under fire from U.S. lawmakers after reports surfaced that the company is exploring ways to let children under age 13 onto its social network, Bloomberg News reported.
Co-chairmen of the Bi-Partisan Congressional Privacy Caucus, Texas Republican Joe Barton and Massachusetts Democrat Edward Markey, sent a letter Zuckerberg Monday asking him to provide details on the company's plans on the matter since children under 13 fall under stricter regulations in regards to online privacy.