Investors File Suit Against Facebook, Underwriters

Three Facebook investors filed a civil lawsuit in Manhattan federal court, alleging the company and its underwriters failed to properly disclose changes to analysts' forecasts made at the underwriting banks.

The suit follows reports that analysts at Morgan Stanley and Goldman Sachs Group cut their revenue forecasts on Facebook amid the investor roadshow, a change that wasn't widely disseminated. Late May 22, Massachusetts sent a subpoena to Morgan Stanley following the reports. Several other plaintiffs' lawyers have said they filed suits over the offering in other courts throughout the country, but Wednesday's investor suit focused specifically on the revelations about the analysts' changes. The investor suit, which is seeking class-action status, alleges changes made to Facebook's offering document a week before the IPO priced didn't accurately portray the impact on Facebook's revenue growth. Facebook had said in an amended filing that its mobile users were growing rapidly in the second quarter but that advertising revenue wasn't keeping pace. Following that report, several independent analysts issued new projections on revenue that were widely reported.