Facebook Inc. agreed to pay $35 million to settle claims that its officers and directors misled investors in the its 2012 initial public offering, said a memorandum filed in a U.S. District Court in New York on Monday by the lead plaintiffs.
The investor class, led by the $16.1 billion Arkansas Teacher Retirement System, Little Rock, and $4 billion Fresno County (Calif.) Employees' Retirement Association, agreed to the settlement.
The defendants deny "any and all allegations of fault, liability, wrongdoing or damages," court documents said.
"The settlement will bring to a close almost six years of hard-fought litigation, which included significant motion practice, certification of a litigation class, the completion of fact and expert discovery, trial preparation, and robust arm's-length negotiations between counsel facilitated by … mediators," the filing said.
The suit, filed in 2012, alleged that Facebook failed to disclose that it had learned that a trend prior to the IPO of increasing mobile usage had negatively impacted its advertising business, and as a result, cut its revenue estimates for the second quarter of 2012 and full year 2012.
The complaint further alleged that, rather than disclose these facts, Facebook filed an amended registration statement in which it represented that mobile usage "may" impact its revenues even though the trend allegedly had already had a negative impact on the company's revenues. The complaint also alleged that the price of Facebook's common stock declined following news reports published after the close of trading on May 18, 2012, and before the opening of trading on May 22, 2012.
The plaintiffs originally claimed to have lost $7.2 million from the May 18 Facebook IPO.
The $98.3 billion North Carolina Retirement Systems, Raleigh, was originally a lead plaintiff in the suit, but voluntarily withdrew as co-lead plaintiff in November 2016, according to the memorandum.
"We believe that resolving this case is in the best interests of the company and its shareholders. We remain focused on our mission and building the best products and services for our community," said Sandeep Solanki, Facebook director and associate general counsel, in an emailed statement.
John Rizio-Hamilton, a partner at the law firm Bernstein Litowitz Berger & Grossmann and co-lead counsel for the lead plaintiffs and the class, said the lead plaintiffs decline to comment.