In re Facebook, Inc., IPO Securities and Derivative Litigation

Settled: Pending Court Approval

On February 26, 2018, the court preliminarily approved a $35 million settlement to resolve a securities class action against tech giant, Facebook

On December 6, 2012, Labaton Sucharow was appointed as co-lead counsel for lead plaintiffs in a securities class action against Facebook, Inc. relating to the company's May 17, 2012 initial public offering (“IPO”).

On May 17, 2012, Facebook and the IPO underwriters conducted the IPO—in which the selling shareholders sold 421 million shares of Facebook stock at $38 per share for total proceeds of over $16 billion, representing one of the largest IPOs for a technology company in history. The very next day, previously undisclosed news of Facebook's declining revenues began to emerge. Reuters reported that, just days before the IPO, Facebook had taken the "rare and disruptive" step of cutting its revenue guidance to analysts during the time period that its IPO roadshow was occurring. This news swept through the market and, over the weekend of May 19-20, 2012, members of the financial press reported that this information was highly material and fundamentally affected the value of the company's stock.

Reuters later revealed additional information regarding Facebook's revenue cuts, including that, in response, analysts from three of the lead IPO underwriters (Morgan Stanley, Goldman Sachs, and JPMorgan Chase) had also revised their revenue estimates for the company in the midst of the company's IPO roadshow, but disclosed this fact only to a small number of select clients. In response to the above disclosures, the Facebook's stock price fell more than 18 percent below the IPO price, wiping out billions of dollars in market capitalization. The lead plaintiffs, who represent a class of purchasers of Facebook Class A common stock in the IPO, allege that Facebook made materially untrue and misleading statements in its Registration Statement and Prospectus.

The lead plaintiffs filed a consolidated complaint on February 28, 2013. On April 30, 2013, the defendants filed a motion to dismiss the consolidated complaint. On December 12 2013, the court denied the defendants' motion to dismiss the consolidated complaint in all respects, an important victory for lead plaintiffs and the class. In a second attempt, the defendants filed a motion to amend and certify the December 12 ruling for interlocutory appeal. On March 13, 2014, the court denied that motion as well, stating, "the issues raised by Defendants' are a repeat of the arguments Defendants unsuccessfully raised in its motion to dismiss, and a motion for certification of an interlocutory appeal may not be used to simply 'repeat arguments made in [a] motion to dismiss.'"

Lead plaintiffs moved for class certification on December 23, 2014, and on December 11, 2015, the court granted class certification.. Labaton Sucharow with co-lead counsel jointly stated, "For our country's initial public offering process to work efficiently, there must be accountability when the process is misused. The certification was an important step for the case and for financial accountability more generally." Class Notice was mailed to potential class members beginning on August 4, 2016. The deadline for seeking exclusion from the class was October 3, 2016.

Merits and expert discovery was completed and motions for summary judgment and Daubert motions were pending before the court when the Parties reached their agreement in principle to settle the action.

The case is In re Facebook, Inc., IPO Securities and Derivative Litigation, No. 12-md-02389 (S.D.N.Y.). The lead plaintiffs are Arkansas Teacher Retirement System and Fresno County Employees' Retirement Association. Labaton Sucharow represents North Carolina Department of State Treasurer and Arkansas Teacher Retirement System. The defendants include Facebook, Inc., certain Facebook directors and officers, and the underwriters of the Facebook IPO.

Submit Proof of Claim

If you purchased or otherwise acquired Class A common stock of Facebook in or traceable to Facebook’s May 17, 2012 IPO during the period from May 17, 2012 through May 21, 2012, inclusive, and were damaged thereby, you may be entitled to receive money from the proposed settlement. To be eligible for a payment, you must submit a Claim Form by July 24, 2018 in accordance with the instructions set forth in the Settlement Notice.

Settlement Hearing

A Settlement Hearing has been scheduled for September 5, 2018 at 10:00 a.m. before the Honorable Robert W. Sweet, in the United States District Court for the Southern District of New York, Daniel Patrick Moynihan United States Courthouse, 500 Pearl St., New York, NY 10007-1312, Courtroom 18C. If you have questions about the settlement, please contact Labaton Sucharow at settlementquestions@labaton.com or 1-888-219-6877, or contact the Claims Administrator, AB Data, Ltd. at (866) 963-9974.