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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.

4 of 111 comments (clear)

  1. 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.

  2. 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=-
  3. 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.