Facebook’s initial public offering is the subject of two congressional inquiries and mounting lawsuits as the social network enters its fifth day of public trading. The shares regained some ground Wednesday, rising $1, or 3.2 percent, to close at $32. They were up another 50 cents, or 1.6 percent, to $32.50 in early premarket trading Thursday. But they are still more than 14 percent below their $38 per share IPO price last week.
The stock’s rocky inaugural trading day last Friday was followed by a two-day decline. The launch was held up by a half-hour delay, caused by glitches on the Nasdaq Stock Market. It was marred further this week as investors began accusing the banks that arranged the IPO of sharing important information about Facebook’s business prospects with some clients and not others.
Several shareholders who bought stock in the IPO have filed lawsuits against Facebook, its executives and Morgan Stanley, the IPO’s lead underwriter. At question is whether analysts at the big underwriter investment banks cut their second-quarter and full-year forecasts for Facebook just before the IPO, and told only a handful of clients about it.
One lawsuit, filed in U.S. District Court in New York, claims Facebook’s IPO documents contained untrue statements and omitted important facts, such as a “severe reduction in revenue growth” that Facebook was experiencing at the time of the offering. The suit’s three plaintiffs, who bought Facebook stock on its first day of trading May 18, claim they were damaged in the process.
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