Facebook’s disappointing performance during their IPO Friday now seems to be the least of their worries.
A class action suit was brought against the social network Wednesday, and the Massachusetts Secretary of the Commonwealth issued a subpoena to lead IPO underwriter Morgan Stanley. The investors’ suit claim the registration statement filed with the Securities and Exchange Commission prior to the IPO was misleading. They have charged Facebook with failure to disclose information that ultimately reduced their performance estimates and stock valuation.
On May 9, Facebook released a revised S-1 filing that said Facebook wasn’t generating enough revenue from their mobile users, according to the Washington Post. The amount of members who log in from mobile devices is growing, and Zuckerberg said they do not have a solid mobile strategy yet. Analysts at Morgan Stanley, JP Morgan and Goldman Sachs cut their revenue estimates after seeing the report, but investors claim that the information never reached them.
Other social networks and companies connected to Facebook experienced stock declines as well on the day of Facebook’s IPO. In fact, a report from The Atlantic said that Zynga’s stock fell 13 percent by market close on Friday.
Added to Nasdaq’s blunder during the opening of the IPO, many are saying these events are eroding their faith in Facebook and in Wall Street.
Twitter user Paul Johnson (Johnson_PP) shared a thought that referenced the 2010 Facebook movie by David Fincher.
“After the IPO deception, ‘The Social Network’ deserves a sequel,” he tweeted.