Facebook and its co-defendants — banks including Morgan Stanley, the lead underwriter of its initial public offering — are seeking dismissal of a lawsuit on the grounds that the social network had no obligation to publicly disclose internal projections on how increased mobile usage and product decisions might affect future revenue.
According to Reuters, the suit accused Facebook and the banks of misleading investors about the company’s financial condition in the days prior to its IPO last May 18.
Reuters reported that the filing with U.S. District Court in Manhattan said that the Securities and Exchange Commission has “consistently” refused to require companies to publicly disclose all “material nonpublic information” shared with analysts prior to IPOs, due to the potential impact on companies’ ability to raise money, adding:
Plaintiffs would have this court impose – retroactively — a rule which the SEC has for decades thoughtfully rejected. This court should decline the invitation.
Max Berger, a partner at Bernstein Litowitz Berger & Grossmann, which is representing pension funds and other investors, the lead plaintiffs, told Reuters in an email:
There is no reasonable basis for dismissal. We will oppose the motion in due course.
Readers: How do you see this case turning out?
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