Lead Plaintiffs Appointed in Suit Over New Facebook Stock

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By Michael Greene

May 17 — Majority union-owned Amalgamated Bank and Swedish pension fund Sjunde AP-Fonden (AP7) were appointed co-lead plaintiffs May 17 in a purported class action challenging Facebook Inc.'s plan to create a new class of non-voting stock.

Vice Chancellor J. Travis Laster also appointed law firms Grant & Eisenhofer PA and Kessler Topaz Meltzer & Check LLP as co-lead counsel, and Prickett Jones & Elliott PA as additional counsel in the consolidated Delaware Chancery Court case.

According to their jointly-filed application to be appointed lead plaintiffs, Amalgamated Bank and AP7 collectively hold 1.8 million shares of Class A Facebook stock, valued at approximately $220 million.

Shareholder Approval Required

In April, Facebook's board announced that it was recommending that shareholders approve the creation of new class C shares, which provide no voting rights. Under the proposed plan, the company would potentially pay a dividend of two shares of Class C stock for each share of Class A and Class B stock.

Since the announcement, 13 shareholder lawsuits have been filed alleging that directors breached their fiduciary duties by supporting the reclassification of shares. The plaintiffs claim that the reclassification would unfairly treat minority stockholders (85 CARE, 5/3/16).

Currently, stockholders who own Facebook Class A shares have one vote per share, and those with Class B shares have 10 votes per share. Facebook founder Mark Zuckerberg, who owns or controls the majority of Facebook's Class B stock, has over 60 percent of the voting power in the company and can alone approve the plan at Facebook's June 20 annual meeting.