Facebook is facing a class action lawsuit by two of its shareholders who have accused the company of concealing concerns about its growth prior to its initial public offering in May 2012. The shareholders claimed that they bought Facebook shares at inflated prices when it first went public, only to lose money as the stock plummeted in course of time.
US District court Judge Robert Sweet issued an order in Manhattan which allows investors who lost money on Facebook shares to pursue their claims jointly. Although the ruling was made on 11 December, it was kept under wraps. On 29 December, the judge made the order public by lifting the seal that had been previously placed on it.
Judge Sweet is reported to have claimed that given the size of the case, allowing two subclasses to jointly pursue their claims "adds more weight to the predominance of common questions and answers, practically negating the individualised questions raised".
Facebook has been accused of concealing information pertaining to its growth projections in the area of mobile devices and how it might affect the prospects of its shareholders. The company's mobile devices section was believed to have generated limited revenue, consequently affecting the overall share prices.
Facebook made its market debut on 18 May, 2012 at $38 (£25,€34) per share. On 4 September 2012, however, the share price fell to $17.55 (£11.83,€16.06). The prices remained below the IPO price for the remainder of the year. Reuters reported that the company's stock on 29 December closed at $107.26 (£72.33,€98.19) making for a net worth of around $303bn (£204bn,€277bn).
Facebook is contesting the suit claiming it to be "without merit". The company also claimed that the accusations levelled at it are conflicting of "well settled" precedents within the law. Defending its practices and refuting the basis of the suit, Facebook claimed: "The suggestion that class members' knowledge might be inferred on a class-wide basis flouts due process."