Facebook is sued after stock plunge 'shocked' market

The plunge in Facebook shares stemmed from federal securities law violations by the defendants

NEW YORK: 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 per cent 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. A Facebook spokeswoman declined to comment.

Shareholders often sue companies in the United States after unexpected stock price declines, especially if the loss of wealth is large.

Facebook has faced dozens of lawsuits over its handling of user data in a scandal also concerning the UK firm Cambridge Analytica. Many have been consolidated in the federal court in San Francisco.



Thursday’s plunge also hit Zuckerberg’s bottom line.

Zuckerberg had been tied with Warren Buffett as the world’s fourth-richest person, but the Berkshire Hathaway chairman’s current $83 billion fortune tops Zuckerberg’s $66 billion, Forbes magazine said.

Buffett now ranks third among the world’s billionaires, while Zuckerberg is sixth.

Facebook shares fell another 0.8 per cent on Friday, closing at $174.89 on the Nasdaq.