Facebook Asks Court to Consolidate IPO Shareholder Suits

Facebook Inc. (FB) asked a court to consolidate more than 40 shareholder lawsuits over the social networking company’s initial public offering last month.

Facebook, which has lost $22.5 billion in market value since its initial public offering, asked a multidistrict litigation panel yesterday to assign all of the federal cases to a judge in Manhattan, including 23 that were filed in New York and four filed in California.

Investors sued Facebook and Nasdaq OMX Group Inc. (NDAQ) over problems in trading company shares on May 18, the first day they were publicly available. Some of the suits include claims that investors lost money when Nasdaq failed to process buy orders and directions to cancel orders weren’t being processed.

Nasdaq has blamed poor software design for the difficulties in processing Facebook trades.

“Over 30 copy-cat securities and derivative lawsuits against all or some combination of the Facebook and underwriter defendants now assert the theory that Facebook’s conversations with the underwriters’ analysts and the analysts’ subsequent conversations with certain investors create liability under federal securities laws,” Facebook said in yesterday’s filing.

Coordination of shareholder suits over the initial public offering in federal court in New York is “the best way both to streamline discovery and to eliminate the risk of inconsistent rulings on potentially critical issues,” Facebook said.

Brian Murray, a lawyer representing a plaintiff in one of the suits against Facebook in New York, didn’t immediately return a call seeking comment on Facebook’s request.

Andrew Noyes, a spokesman for Facebook, declined to comment on the consolidation request.

Price Range

Before its debut, Facebook told regulators that the proposed price range reflected the fair value estimated earlier this year. The Menlo Park, California-based company set a proposed IPO price range of $28 to $35 a share on April 25, based on a projected fair value of $30.89, according to correspondence with the U.S. Securities and Exchange Commission released today.

Facebook raised $16 billion in the May 17 IPO, the largest ever for a technology or Internet company. Since then, shares have tumbled on concerns that ad revenue growth won’t keep pace with surging membership as more users access the site on mobile phones. Filings today show the SEC also questioned Facebook about its ability to generate revenue from mobile ads.

The company said in today’s court filing that it amended the registration statement for its public offering with regulators on May 9 to disclose that “the trend of Facebook’s daily average user growth outpacing growth in the number of ads delivered had continued during the second quarter of 2012.”

Facebook said its May 9 amendment “also warned about the negative impact of the trend on company’s revenues and financial results.”

Shares rose 4.3 percent to $29.51 at 3:52 p.m. in trading in New York.

The case is In re Facebook Inc. IPO Securities & Derivative Litigation, Case Pending No. 76, U.S. Judicial Panel on Multidistrict Litigation (Washington).

To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net. Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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