A panel of judges approved Facebook’s (News - Alert) request to transfer the IPO litigation from California to New York. Despite this minor victory, the social network, which will be tried alongside NASDAQ, is facing an arduous courtroom battle where it must defend itself against a series of plaintiffs seeking restitution for the infamous IPO flop.
Some reports suggest that the plaintiffs wanted to keep the case in California because that is where Facebook is; therefore, documents and other types of evidence against them would be more easily accessible. Facebook is allegedly “pleased” with the decision.
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According to the press, the plaintiffs in this case are blaming the disappointing IPO on Facebook and its underwriters for sharing selective information about the IPO with only special investors. Facebook, on the other hand, is pointing the finger at NASDAQ for failing to trade at its peak. All of the litigations against the two companies (sources say there are at least thirty-three) will be grouped together so as to avoid scheduling conflicts.
In response to the “technical glitch” behind the IPO, Congress announced in June its intentions of pushing for stricter policies. The overall loss was estimated at $450 million, so it should come as no surprise that NASDAQ’s proposal for a $40 million pay-out was seen as insufficient at best. The plaintiffs in this suit have not specified an amount they seek for damages.
The day before Facebook’s IPO, reports circulated that “all is not well” for Facebook. Some of the evidence included GM’s seemingly sudden decision to bail along with members of the social network’s very own staff. TMCNet suggested that these events presented a “bit of a red flag.” As it turns out, Facebook’s stock did indeed drop by 50 percent following its IPO, and it looks as though it continues to drop as shares closed at $21.95 on Thursday.
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Edited by Brooke Neuman