Facebook, Inc. (FB: Quote) is seeking the consolidation of more than 40 investor lawsuits filed against it in various federal and state courts and to transfer them as one case to be heard in the Federal court in the Southern New York district, according to a 24-page court brief filed by the social network on Thursday.
The civil lawsuits, filed against Facebook, some of its directors, the IPO underwriters and the Nasdaq stock market, are related to the trading system glitches on the Nasdaq during its IPO last month, which saw investors lose millions.
Facebook blamed Nasdaq in the filing for the technical glitches contributing to the a decline in the share price that prompted numerous investors to file lawsuits. Nasdaq has also acknowledged that the technical glitches affected Facebook IPO trading.
The widespread chaos on the Nasdaq when saw investors failing to receive order confirmations for its Facebook trades and many resubmitted the order multiple times when it failed to receive confirmation of the order. This saw multiple orders getting logged in, leading to a higher-than-expected volume of stock being purchased.
The lawsuits filed by investors of Facebook also primarily charge it of violating laws by not publicly disclosing the lowering of its revenue projections just before the IPO amid anticipation of lower advertisement revenue growth.
The investors claim that Facebook selectively disclosed the information to analysts, who then shared it with select institutional investors who were able to act on it immediately.
Facebook acknowledged the investor claims in the brief, but added that the revenue impact was widely reported in the media after it had revealed the same in a regulatory filing with the U.S. Securities and Exchange Commission on May 9. The company added it was not required to disclose the revenue projection impact in its IPO registration filings.
The technical glitches at the Nasdaq stock exchange that marred the blockbuster offering saw the first trade of the social network getting postponed by 30 minutes, and also leaving investors with improperly processed orders.
Nasdaq has confirmed that matching up the buy and sell orders to arrive at the price for the first trade took five milliseconds instead of the normal three milliseconds. Amid this delay, the exchange's systems were flooded with messages to adjust orders or cancel trades.
While Nasdaq has taken the service of IBM Corp. (IBM) to review its operating systems and fix the trading issues, the exchange has set aside a $40 million fund to compensate traders for the technical glitches. The compensation amount is seen as inadequate as about 30 million shares worth of trading were reportedly affected by the glitch.
Facebook's IPO, the largest ever for an Internet company, at $38 per share, raised $16 billion, giving the Menlo Park, California-based firm a market valuation of $104 billion, higher than that of Yahoo, Dell, Cisco, Visa, Amazon.com and HP.
Many of the clients who invested in Facebook on its debut suffered huge losses as the share fell in the following days. The stock has fallen as low as $25.52, down 33 percent from its May 18 listing price of $38, and is currently down 21 percent at $30.01. The company, the exchange and the underwriters are now facing lawsuits and regulatory reviews.
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by RTT Staff Writer
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