Yesterday, a New York federal judge has certified two classes in the shareholder suit against Facebook over its $16 billion initial public offering. In certifying the two classes, the judge found while some individual questions exist in the case, the investors clearly fall into two distinct categories.
One of the classes will cover institutional investors, while the other will be for retail investors, according to the opinion. One of the classes will cover institutional investors, while the other will be for retail investors. The judge also wrote in his opinion though Facebook has indicated that it plans to offer individualized defenses against many of the investors, the size of the case and the number of parties involved makes class certification the best way to proceed and that the presence of common questions/answers outweighed any individualized questions.
Facebook's hotly anticipated debut in May 2012 was besieged with a number of technical problems forcing NASDAQ to delay trading. When shares finally began moving, they sold for more than $40 apiece for a time, but by the end of the day had fallen to $38.23, just north of the $38 pretrading target. The stock price subsequently tumbled further, not recovering for over a year.
In the suit, investors allege Facebook's public disclosures ahead of the float were misleading and that the company eventually slashed its revenue estimates after failing to sufficiently factor in its ability to monetize the growing trend toward mobile usage. Investors say Facebook then told the underwriters but not the investing public. In response, Facebook argued many investors, retail included, knew about the revenue issues ahead of the IPO, either through media reports, advisers or personal knowledge.
"This is the most efficient way to manage both the predominant common questions and the individualized questions in this case without overwhelming the common adjudication with individualized issues and vice versa," the opinion said.
In a statement Monday, Facebook said it was appealing the certification.
The experienced securities fraud attorneys at Colling Gilbert Wright & Carter investigate and file class action lawsuits on behalf of aggrieved investors. If you believe you may have the basis for a class action securities claim, please contact us for a free case evaluation.