NEW YORK (Legal Newsline) - The premier social networking utility, Facebook, is being sued by shareholders.
Also named in the lawsuit were the company's executives and Morgan Stanley, which led the company's recent initial public offering. Stock in the company was offered to the public May 18.
Three shareholders, Brian Roffe, Jacob Salzmann and Dennis Palkot filed the lawsuit against Facebook, Mark Zuckerberg, Marc Andreessen and other executives -- as well as Morgan Stanley, Goldman Sachs, Merrill Lynch and Barclays Capital.
It was filed in the U.S. District Court for the Southern District of New York on Wednesday. It is a class action suit and the plaintiffs are demanding a jury trial. They allege violations of federal securities laws.
The specific allegations are that the registration statement and prospectus contained untrue statements and omitted statements regarding the projections for Facebook's profitability. The plaintiffs state that at the time of the initial public offering, the company had been experiencing a "severe and pronounced" decline in revenues as a result of people using the application and website on their mobile devices. Facebook said that such uses is an area where their "ability to monetize is unproven."
The plaintiffs also state that the underwriter knew this but only shared this information with "preferred investors." Estimates for the second quarter and full year were reduced by the underwriters this too was not disclosed to all potential investors.
Calls to Morgan Stanley and Goldman Sachs were not returned.