14 DAY TRIAL // Facebook Inc. and dozens of banks have asked a federal judge to throw out a lawsuit that accuses the social media company of misleading investors about the real state of its finances before its IPO a year ago.
Their main argument is that before the initial public offering back in May 2012, it wasn’t mandatory for the company to disclose internal projections about mobile usage or product decisions and how these could affect future revenue, Reuters reports.
The defendants said that the U.S. Securities and Exchange Commission has refused to require such broad disclosure because of it could affect a company’s ability to raise money.
Now, Facebook requests that the same rule be applied to them and, despite the fiasco that the IPO was, they shouldn’t be held liable for any losses investors have suffered.
Prior to the May IPO, Facebook’s market value rose gradually and talks were that the share price would reach $45 (€34) immediately after the options were available on the stock exchange.
However, what was considered to be one of the biggest IPOs in technology didn’t turn out so well.
The hype around the event increased the company’s value artificially and the price per share in the day of the IPO fluctuated between $34 (€26) and $38 (€29).
After word leaked out about the company’s limited capacity to monetize the mobile area of the business, investors started selling out their stock.
A week after the initial public offering, Facebook stock prices had plummeted to $26.81 (€20.40), which made many people unhappy since they lost a lot of money by investing in the social media giant.
Even now, a year after the event, investors don’t seem to trust Facebook since the stock price is pretty much the same as it was then.
With Facebook’s first quarter earnings report around the corner, many are eager to see what progress the company has made regarding their mobile platform and if their revenues have increased in the advertising department.