Facebook and some of the biggest names in Silicon Valley, including Morgan Stanley, are being pursued over the social networking giant’s disastrous IPO by the same San Diego-based law firm that won a $7bn settlement for Enron’s shareholders after its collapse in 2001.
The law firm Robbins Geller is heading a lawsuit alleging that Facebook and its bankers misled investors about the true state of their business while informing a handful of privileged clients about the company’s true prospects.
Financial regulators are to investigate whether the banks in charge of Facebook’s IPO broke the rules by selectively publishing negative news about the company before shares went on sale.
The allegations are that Morgan Stanley and several other banks released reduced revenue forecasts for Facebook to the bigger investors, but not to the general public before Facebook shares went on sale, which could constitute a violation of securities law.
The lawsuit, names Facebook’s founder Mark Zuckerberg as one of the defendants, as well as top investors such as Peter Thiel and Marc Andreessen, Goldman Sachs, Barclays Capital, and JP Morgan.
It comes as US regulators FINRA announce their investigation into the handling of Facebook’s IPO. More shareholder lawsuits are expected.