Facebook IPO Class Actions Consolidated, Lead Plaintiffs and Lead Counsels Appointed

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  • Key Holding: Court consolidates 41 class actions filed against Facebook, NASDAQ, and underwriters arising out of the May initial public offering of Facebook.

  • Takeaway: Court consolidates Facebook IPO class actions and appoints lead plaintiffs and lead counsels.

The U.S. District Court for the Southern District of New York Dec. 6 approved the separate consolidation of class actions against Facebook Inc. (FB) and NASDAQ OMX Group Inc. (NDAQ) arising out of Facebook's May 18 initial public offering (In re Facebook Inc., IPO Securities and Derivative Litigation, S.D.N.Y., 1:12-cv-04054-RWS, 12/6/12).

Judge Robert W. Sweet consolidated the 41 class actions into two sets of cases--one against Facebook and one against Nasdaq--appointing lead plaintiffs and lead counsels for each. The 41 cases were transferred to the Southern District in October by the Judicial Panel on Mutlidistrict Litigation.

In the May IPO, 421 million shares of Facebook common stock worth more than $16 billion were offered on the NASDAQ stock market. The IPO drew the attention of regulators and legislators, as well as lawsuits from investors who complained about technical glitches and selective disclosures.

Separate Class Actions
The court separated the 41 class actions into two sets: the Securities Actions and the NASDAQ Actions. The Securities Actions alleged that the registration statement and the prospectus issued in anticipation of the IPO misrepresented Facebook's financial condition by failing to disclose to all investors a material decline in revenue growth.

The NASDAQ Actions, filed on behalf of retail investors, alleged that the orders to purchase or sell Facebook stock were not properly administered as a result of technological issues that NASDAQ experienced on the day of the IPO, thereby resulting in monetary damages.

Specifically, the NASDAQ Actions are comprised of: one class action asserting that NASDAQ made material misrepresentations and omissions about the capability of its trading platform technology; and nine class actions alleging state law negligence claims over technical problems. Further, several of the Securities Actions and the NASDAQ Actions additionally asserted derivative actions against directors of Facebook for allegedly breaching various duties to shareholders.

Finding common questions of law and fact, the court consolidated the Securities Actions to include all claims based on the 1933 Securities Act and the 1934 Securities Exchange Act. As the lead plaintiffs of the Securities Actions, the court appointed the “Institutional Investor Group,” comprised of the North Carolina Retirement Systems, Banyan Capital Master Fund Ltd., Arkansas Teacher Retirement System, and the Fresno County Employees' Retirement Association. To represent the Securities Actions plaintiffs, the court appointed two co-lead counsels: Bernstein Litowitz Berger & Grossmann LLP, New York. and Labaton Sucharow LLP, New York.

Next, despite the differences in the theories of liability asserted against NASDAQ, the court consolidated the 10 class actions. The court reasoned that all claims asserted against NASDAQ arise out of the same operative facts involving the same group of defendants and class of investors, all seeking recovery of the alleged monetary losses.

As the lead plaintiffs of the NASDAQ Actions, the court appointed the “NASDAQ Claimant Group,” comprised of First New York Securities LLC, T3 Trading Group LLC, and Avatar Securities LLC. To represent the NASDAQ Actions plaintiffs, the court appointed Entwistle & Cappucci LLP, New York.

A pre-trial conference is scheduled for Jan. 23, 2013.

For the opinion, go to /uploadedfiles/BNA_V2/Images/From_BNA_V1/News/In-re-Facebook(1).pdf

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