Facebook has finally responded to the welter of law suits it faces over its badly managed IPO last month. It seems the main line of its defence will be to pass the buck to the Nasdaq and, basically, blame somebody else - more or less what you would expect from an adolescent company. By Martyn Warwick.
Late on Friday afternoon Facebook, together with its main underwriters, Goldman Sachs, J.P. Morgan and Morgan Stanley, filed a legal motion in the Federal District Court in the Southern District of New York.
The motion, petitioning the court to allow the legal processed to be "streamlined" by "consolidating" all the pending lawsuits, shows that the social network and its underwriter chums want all the legal cases they face to be rolled up together into one big super-case so that they can a) try to get the whole mess settled in one fell swoop and b) and save a lot of money by so doing.
The filing specifically licks at the edges of two big bones of contention; just when and how Facebook sent out detailed IPO information to the analyst community (which then polished up the data and pushed it at institutional investors) and the technical glitches that marred the trading hours in the immediate aftermath of the IPO.
So, to begin at the beginning... on May 9 a little remarked and decidedly under-publicised Facbook release, that was, in essence, meant to be for analyst's eyes only, let it be known that the company might not hit its financial targets as far as the all-important mobile sector is concerned. Had that news been more generally broadcast, it would may well have forced a reduction in the IPO asking price of US$38 a share.
Facebook claims that these revelations were no more than "customary practice" but does admit that various senior executives later followed up the release by having "several" discussions about what the company coyly describes this "softness" in its "forward-looking projections" (surely a call to Dr. Ruth would have provided some good advice about hardening things up? Then it may well have been a case of "is that a forward-looking projection in your pocket, or are you just pleased to see me?" and big smiles all round).
Based on these informal chats several influential analysts then lowered their Facebook forecasts and then discussed their actions and the reasons for them with "certain institutional clients". They certainly did, but certainly and conspicuously failed to do the same with certain others.
Then the blame game starts. Facebook says the IPO snafu was the direct responsibility and fault of the Nasdaq, the exchange that beat the New York Stock Exchange in a nasty contest to manage the listing of Facebook.
Facebook claims that the Nasdaq's systems and processes were simply not up to handling the greatest floatation since Noah's Ark. The social media company says trading in Facebook shares was delayed and disrupted “as a result of problems with Nasdaq’s software systems, which impaired the orderly executions of trades and price levels.”
According to Facebook and its underwriters, these factors "created a chaotic environment that prompted many investors to sell."
Hmm. Where's George Washington when you need him? He wouldn't have pointed a finger and said, "I cannot tell a lie, it was him".
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