An investor lawsuit led by North Carolina Retirement Systems, Raleigh, against Facebook Inc. and its IPO underwriters can proceed, a federal judge ruled Wednesday.
Judge Robert W. Sweet of the U.S. District Court in New York denied the defendants' motion to dismiss the complaint against Facebook officials and IPO underwriters Morgan Stanley, J.P. Morgan Securities and Goldman Sachs for losses due to alleged improprieties in the offering documents.
Mr. Sweet ruled that terms used in the documents “fail to constitute sufficient disclosure” given that Facebook was aware of “material negative impact” on revenues from changes in usage and product decisions before the IPO.
The $83.1 billion North Carolina Retirement Systems was granted lead plaintiff status in December 2012 for a group that includes the $13 billion Arkansas Teacher Retirement System, $3.8 billion Fresno County Employees' Retirement Association and Banyan Capital Master Fund; the group claims losses of $7.2 million for the problematic IPO.
The investor group is arguing that their purchases of Facebook shares during its IPO were 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 court documents.