A settlement of a class action against Facebook was preliminarily approved on February 26, 2018. The deal was reached to a securities fraud suit that had been certified as a class action.
The suit alleged the tech giant hid key financial forecast information from investors leading up to its initial public offering in May 2012, causing its stock to languish in its first year.
If the court grants its final approval, the deal would resolve multiple class actions that were launched in 2012 against Facebook, its underwriters and its top executives, including its CEO Mark Zuckerberg, its COO Sheryl K. Sandberg and billionaire board member Peter A. Thiel.
The consolidated complaint alleged that leading up to its IPO, the company intentionally hid information from investors that revealed more users were using their phones to access Facebook’s website, instead of their computers, and as a result, the company’s advertising revenues were purportedly taking a hit.
Facebook went public on May 17, 2012, and sold more than 421 million shares of common stock at $38 per share on the Nasdaq, raising $16 billion from investors. The complaint alleged that Facebook’s common stock price declined shortly thereafter, hitting an $18 low, and then it took more than a year to rebound. On February 26, 2018, Facebook’s stock was valued at about $184.93 per share on the Nasdaq.
The dispute was set to go to trial this month, but the parties struck the $35 million deal with the help of a mediator, court documents show. The case is In re: Facebook Inc. IPO Securities and Derivative Litigation, case number 1:12-md-02389, in U.S. District Court for the Southern District of New York.