Facebook held its initial public offering (IPO) on 18 May, 2012. This was hailed as one of the biggest IPOs in technology and Internet history, with a peak market capitalisation of over $104bn. However, the stock fell as soon as it opened, and the share prices crashed more than 50 per cent over the next couple of months.
Now investors claim that Facebook hid information about growth concerns prior to its IPO. As such, two class action lawsuits have been filed against Facebook by shareholders.
They suggested that by purchasing the firms shares at inflated prices they lost money.
And Judge Robert Sweet maintained that retail and institutional investors who claimed they lost money could pursue their respective claims as groups.
In a 55-page decision, Sweet said that given the extraordinary size of the case, allowing two subclasses “in fact adds more weight to the predominance of common questions and answers, practically negating the individualized questions raised”.
Facebook told the BBC that it believed the class certification is “without merit”.
The tech giant also said the decision “conflicts with well-settled Supreme Court and Second Circuit law”, and it has already filed an appeal.
“The suggestion that class members’ knowledge might be inferred on a class-wide basis flouts due process,” the appeal said.