Facebook wins first IPO shareholder case
The company did not withhold certain projections from investors, a ruling said
IDG News Service - Facebook scored an initial legal victory in its IPO case following a federal judge's dismissal of a group of investor lawsuits filed against the company.
More than 30 lawsuits were filed against Facebook after it went public last May, alleging that the company shared business information with analysts who then shared the information with large institutional investors without disclosing it to the wider investing public.
Facebook, however, did make "extensive warnings" in its registration statement, drafts of the registration statement and in its final IPO documents about the health of its business tied to mobile trends, according to a ruling filed Wednesday in the U.S. Court for the Southern District of New York.
"Even if internal projections could be considered material to the IPO, [the plaintiffs] have not demonstrated that the Facebook projections would have 'significantly altered the total mix of information in the marketplace,' considering that these disclosures were publicly disseminated," the ruling said.
"Based upon our experience in the second quarter of 2012, to date, the trend we saw in the first quarter of [daily active users] increasing more rapidly than the increase in number of ads delivered has continued," Facebook said in its registration statement filed May 16 with the U.S. Securities and Exchange Commission, two days prior to its IPO.
The social network has come under pressure to increase its revenue as users flock to mobile devices, but advertisers maintain a stronger presence on the desktop. The company reported during its fourth-quarter earnings call that the number of daily mobile users had exceeded daily Web users for the first time ever, though its mobile business constitutes 23% of its total advertising revenue.
Wednesday's ruling addressed the first several IPO lawsuits, which have been classified as derivatives cases. The judge has yet to rule on the remaining class-action securities lawsuits, but Wednesday's ruling addresses the same core allegation related to disclosures.
Basically, the ruling shows that "companies don't have a duty to disclose their projections as part of their written IPO documents," said Facebook attorney Richard Bernstein. "The law has rejected for decades the contrary argument that Facebook plaintiffs have made," he said.
Plaintiffs have 20 days to replead the case. A briefing for the remaining IPO cases will be completed in mid-July; a decision is expected later in the fall.
- VDI and Beyond: Addressing Top IT Challenges to Drive Agility and Growth This paper explores a collection of compelling FlexCast services to highlight how XenDesktop can drive a modern, mobile workforce toward greater agility and...
- Mission Critical: Managing Mobile Applications & Content Smartphones, tablets and other mobile devices have become embedded in enterprise processes, thanks to the consumerization of IT and a new generation of...
- The Challenges and Opportunities of Mobile Application Development Nearly all business users now demand mobile devices--their own or company-owned--along with anywhere access to corporate applications and data. What turns mobile devices...
- Maintain Less. Create More. Spend less on maintenance and spend more time creating with Red Hat Enterprise Linux. Read on to learn how Red Hat can help...
- On Demand: Mastering the Art of Mobile Content Management Mobile device usage in the enterprise has skyrocketed, and it continues to escalate. IT must answer to users who demand access to their...
- What should I look for in a Next Generation Firewall? SANS Provides Guidance With so many vendors claiming to have a Next Generation Firewall (NGFW), it can be difficult to tell what makes each one different.... All Management White Papers | Webcasts