Technology

Facebook Faces Lawsuits As Stock Begins To Rise

The first reactions after the Friday’s initial public offering were not as good as everyone was expecting and Facebook is now facing numerous lawsuits. Share prices dropped a few percentages, especially since Morgan Stanley, the lead underwriter of the IPO, diminished the company’s estimates right before the inaugural moment. According to Reuters, the stock of the social network is getting bigger now despite its legal problems.

Much has been said about Facebook’s IPO. Some analysts were making positive predictions and praising the company’s courage to launch such a big initial public offering; others, on the other hand, claimed that the social network won’t manage to make profit and the IPO will be a fiasco. Fatalists had a brief moment of satisfaction when the share prices dropped almost 16 percent in the first two days, but things took an unexpected turn on Wednesday.

To make it even worse, Facebook was sued by several investors and shareholders because Morgan Stanley cut his estimates before the IPO. They claim the social network, its executives and Morgan Stanley knew this was going to happen, but they chose to share the information with a select group of customers. A lawsuit filed in New York claims that the IPO documents contained false information which tricked investors into buying shares. Spokespersons denied these allegations claiming that the lawsuit is unjust, whereas Morgan Stanley refused to make any comments.

Despite all these stock and legal glitches, Zuckerberg’s social network is slowly recovering after the two-day decline. The Nasdaq Stock Market registered a $1 growth, that is, 3.2 percent on Wednesday. The share price was $32 at the end of the day, but there’s a lot of work to be done until stocks can regain their initial price.

Anthony Michael Sabino, professor at John’s University’s Peter J. Tobin College of Business, told the press that he doesn’t believe Facebook is responsible for investors’ losses. He added that the estimates don’t always come out right. The most important aspect at present is to determine whether the finance report presented by executives was falsified or not.

 

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