Facebook IPO Suits Clear a Hurdle

Facebook Inc. and its underwriters, including Morgan Stanley & Co. and Goldman Sachs & Co., must continue to face claims that they misled investors about the company’s revenue in the run-up to its May 2012 initial public offering.

In a lengthy decision signed Dec. 12 but filed Wednesday, U.S. District Judge Robert Sweet in Manhattan refused to dismiss securities litigation over the Facebook IPO. Sweet ruled that Facebook shareholders sufficiently pleaded that the defendants made material misrepresentations that misled investors about the company’s revenues.After Facebook’s IPO, investors filed more than 40 lawsuits against the company, its executives and its underwriters. In the consolidated cases, the plaintiffs claimed that Facebook and its underwriters should have disclosed that the public’s increased usage of mobile devices was eroding Facebook’s advertising revenue. Co–lead plaintiffs counsel Labaton Sucharow and Bernstein Litowitz Berger & Grossmann opted not to pursue fraud claims, but instead alleged violations of Sections 11, 12, and 15 of the ’33 Act.