Facebook faces IPO class-action lawsuits

Facebook will face two class-action lawsuits after a federal judge said shareholders could pursue their case against the social network, which plaintiffs claim hid concerns about its growth forecasts ahead of its $16 billion initial public offering. The world’s largest social network cut its revenue forecasts in the middle of its IPO roadshow, ahead of the offering in May 2012, amid concerns that consumers were switching to using the site on mobile, where it was unclear if it could generate the same degree of growth from advertisements.

Mark Zuckerberg, Facebook chief executive, and Sheryl Sandberg, Facebook chief operating officer, are among the defendants at Facebook, being sued by two classes of investors -- retail and institutional. The complaint was brought by three state and local retirement plans in the US, lead by the North Carolina state treasurer and five individual investors. Shares in Facebook collapsed following the IPO, falling almost 50 percent in the first three months, as investors worried that it might never generate as much advertising revenue on mobile as it had from the desktop site. However, improvements to the mobile app and marketers’ fast adoption of targeted advertising on Facebook, helped the company grow mobile revenue and it now generates more than three-quarters of its total advertising revenue from ads on mobile devices. Three and a half years on, Facebook’s stock has now soared almost 180 per cent from its first day of trading