* Lawsuit may revive legal claims that have been dismissed
* Lawsuit plaintiff held Facebook stock prior to IPO
* Earlier plaintiffs did not hold Facebook stock before IPO
By Tom Hals
March 4 A Facebook Inc shareholder has
sued the social networking company's Chief Executive Mark
Zuckerberg and others over its troubled IPO, potentially
reviving legal claims that a different court dismissed in
The lawsuit by Gaye Jones alleges that the company's
directors and officers knew that Facebook did not disclose
weaker revenue trends as more users accessed the website through
mobile devices. The complaint alleges that information had been
selectively shared with the company's IPO underwriters and key
Unlike similar lawsuits that were dismissed last month
partly because the shareholders did not own the stock when the
alleged misconduct took place prior to Facebook's May IPO, Jones
has owned Facebook stock since February 2012.
The lawsuit seeks to force the directors and other
defendants to disgorge the money they made from selling stock
through the IPO which they allegedly knew was overpriced.
"The defendants were unjustly enriched because they realized
enormous profits and financial benefits from the IPO, despite
knowing that reduced revenue and earnings forecasts for the
company had not been publicly disclosed to investors," said the
Facebook said in a statement that "we believe this lawsuit
is without merit and will defend ourselves vigorously."
Shares in Facebook's highly anticipated IPO fell from the
initial price of $38 to about $25 within a month. The stock
closed on Monday at $27.72 on Nasdaq, down 6 cents.
Soon after the IPO, which was also marked by technical
glitches on the Nasdaq exchange, more than 50 investor lawsuits
were filed. A proposed class action is being heard in federal
court in Manhattan.
Jones' lawsuit is a derivative case, meaning the investor
seeks to step into the shoes of the company and any money
recovered from Zuckerberg and others through a settlement or
judgment would be paid to Facebook, not shareholders.
Four previous and very similar derivative cases were
dismissed last month by U.S. District Court Judge Robert Sweet
In addition to noting that shareholders did not own stock
prior to the IPO, Sweet said that although plaintiffs had
claimed that Facebook hid facts from investors, the company had
"repeatedly made express and extensive" warnings about the
increased use of mobile applications.
The lawsuit was filed in the Court of Chancery in Delaware,
where Facebook is incorporated, and also named as defendants the
IPO underwriters - units of JPMorgan Chase & Co, Morgan Stanley
and Goldman Sachs Group Inc.
JPMorgan, Goldman and Morgan Stanley declined to comment.
The case is Gaye Jones v Mark Zuckerberg et al, Delaware
Court of Chancery, No. 8375