North Carolina leading institutions’ charge against Facebook

A group of institutional investors led by North Carolina Retirement Systems, Raleigh, is pushing to be named lead plaintiff in an investor lawsuit against Facebook Inc. and its IPO underwriters for losses suffered when the stock's value dropped within days of the offering.

In court documents filed Aug. 8, a group identified as the institutional investor group — which includes the North Carolina Department of State Treasurer on behalf of the $75.9 billion NCRS; $11.3 billion Arkansas Teacher Retirement System, Little Rock; $2 billion Fresno County (Calif.) Employees' Retirement Association; and Banyan Capital Master Fund Ltd. — argued that it should be lead plaintiff because its $7.2 million in collective losses outstrip those of nine other investor groups.

All 10 investor groups seeking lead plaintiff status are arguing their purchase of Facebook shares during its IPO was harmed by “materially false statements and omissions relating to Facebook's business prospects, revenue growth and ongoing shift in the methods by which Facebook users access the company's website,” according to documents filed by the institutional investor group in U.S. District Court in New York on Aug. 8.

“Facebook and its underwriters told one thing to the public, but shared the real facts with only a few select investors on Wall Street,” North Carolina Treasurer Janet Cowell said in an e-mailed statement. “Our goal is to recover our pension fund's financial damages. Moreover, we want to stand up for the investors that Facebook harmed across North Carolina and the nation. It is critical to establish trust with all shareholders during the initial public offering process, and Facebook violated this trust right out of the gate. This case will help ensure that transitions from private to public companies are fair and transparent for everyone.”

According to the group's filing, North Carolina lost $4.1 million when the stock's value dropped immediately after the IPO. Other losses within the group included $782,199 by Arkansas Teachers and $575,422 by the Fresno County Employees' pension fund.

The underwriters named in the lawsuit include Morgan Stanley (MS), J.P. Morgan Securities and Goldman Sachs. Morgan Stanley spokesman Pen Pendleton declined to comment on the lawsuit, and calls to the other underwriters were not returned by press time.

The institutional investor group is being represented by Bernstein Litowitz Berger & Grossmann. Calls to the law firm were not returned by press time.