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Shareholder Sues Facebook After Stock Plunge (reuters.com)

Posted by BeauHD on from the all-about-the-money dept.

An anonymous reader quotes a report from Reuters: Facebook and its chief executive Mark Zuckerberg were sued on Friday in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about $120 billion of shareholder wealth. The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users. Kacouris said the marketplace was "shocked" when "the truth" began to emerge on Wednesday from the Menlo Park, California-based company. He said the 19 percent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants. The lawsuit seeks class-action status and unspecified damages.

9 of 111 comments (clear)

  1. Re: Easy Fix by nukenerd · · Score: 2

    You really want to live in a country like that?

    I want to live on a forum with threads not being highjacked by idiots with their own off-topic agendas. They are like the idiots at sports events who creep up to the TV camera and stick a placard with an advert in front of it at a crucial moment.

    I

  2. It was horribly overpriced by Anonymous Coward · · Score: 5, Insightful

    Businesses can only grow so fast and only so much. But people bid the prices up as if there is unlimited growth potential.

    And when stocks are valued with a growth premium that can never be met, they have a tendency to crash when those lofty expectations aren't meant.

    facebook is still quite profitable but wasn't worth what it was trading at.

    I think the same way about Amazon and definitely the same about Tesla. Neither of those companies can meet the growth that is priced into the share price.

  3. I'm in Tears here by nukenerd · · Score: 2

    FTFA :

    failing to disclose slowing revenue growth

    So the rate of increase is slowing? - that's just awful. But is the rate of the slowing of the increase itself slowing or increasing? - that's what everyone is asking. And is the rate of that increasing (or slowing) of the rate of the slowing of the increase, itself slowing or increasing? How TF can we be drawing graphs and making predictions if they don't tell us these things?

    I'm crying a river here for poor Mr Kacouris and my hankies are running out. Let's kickstart a collection for him.

  4. Re:Suing your own company. by Calydor · · Score: 4, Informative

    If you have shares in a company for 1 million dollars, and those shares are 1% of the company's worth, the company is worth 100 million.

    If you sue the company for 10 million dollars they lose 10% of their value and are now worth 90 million. Your 1% shares are now only worth 900,000 dollars, right?

    But you just got 10 million dollars. Who cares about the shares at that point.

    --
    -=This sig has nothing to do with my comment. Move along now=-
  5. I hope this gets laughed out of court... by Timothy2.0 · · Score: 4, Interesting

    Buying any stock entails *risk*. You're not entitled to the value of that stock to go up. If you buy a stock and it plummets because of shitty corporate policy, *you* invested in a company with shitty corporate policy. Eat your mistake.

    1. Re:I hope this gets laughed out of court... by Wrath0fb0b · · Score: 3

      Buying any stock entails *risk*. You're not entitled to the value of that stock to go up. If you buy a stock and it plummets because of shitty corporate policy, *you* invested in a company with shitty corporate policy. Eat your mistake.

      This is only part-way true. A corporation still has substantial duties with regard to its shareholders. For instance, they can't just spend all the year's profit on hookers and blow for the board. Nor can they flat out lie.

      Of course this case should be laughed out of court. But don't go so far as to say that companies have no duty whatsoever to their shareholders or that all shareholder cases are laughable.

    2. Re: I hope this gets laughed out of court... by Darinbob · · Score: 2

      There are rules of course, if the company lies on their statements and you lose money that way then a lawsuit is suitable. But many of these stockholder advocates who sue are doing so very frequently, to the point that they've become annoyances to the legal system.

  6. For non-financial folks by crashumbc · · Score: 2

    Please be aware these "lawsuits" are usually just scams to suck more money from desperate stock holders. The "lawyers" are the financial version of ambulance chasers.

    Anytime a company loses a large percentage of stock value, a lawsuit is announced. For you to be part of the "class action suit" you need to pay the law firm a non-refundable deposit of usually between 200-600 dollars. The kicker is the lawsuit never actually happens and the client is out even more money.

  7. Recursion by Synonymous+Homonym · · Score: 2

    If Kacouris can sue Facebook for losing value, or rather not telling him in advance to dump his stock in them,

    then other stock holders can sue Kacouris for sueing Facebook, thereby causing tge company to lose value, without telling them in advance.

    I doubt that any judge would rule in Kacouris' "favour", but I would laugh if they did.