Zuckerberg & Facebook slapped with lawsuit for failing to warn investors of slowing growth
Facebook investors are suing the social network, its CEO Mark Zuckerberg and CFO David Wehner after a poor earnings report wiped out nearly $160 billion of shareholder wealth.
The lawsuit, filed by shareholder James Kacouris in a Manhattan federal court, could be the first of many claims over a disappointing earnings announcement by the social media and social networking service corporation. Facebook is also dealing with dozens of suits over its handling of user data in connection with the UK firm Cambridge Analytica. Many of those lawsuits have been reportedly consolidated in the federal court in San Francisco.
Kacouris accuses Facebook and its two top-managers of making misleading statements or failing to disclose slowing revenue growth, falling operating margins and declines in active users. The lawsuit seeks class-action status and unspecified damages.
According to the complainant, the marketplace was “shocked” when “the truth” began to emerge on Wednesday from the Menlo Park, California-based company. Kacouris said that the 19 percent drop in Facebook shares the next day stemmed from federal securities law violations by the defendants.
Last Wednesday, the corporation lost roughly one-fifth of its value after reporting dismal earnings as well as warning of worse-than-expected user growth. Facebook shares plunged nearly seven percent immediately, and then tumbled over 20 percent during the company's call with investors. As a result, the company’s market value dropped $148 billion. The sell-off wiped nearly $17 billion off Mark Zuckerberg's net worth.
It was the second time Facebook stock took such a dramatic plunge. Company shares saw a massive drop in March in the wake of the Cambridge Analytica data breach scandal.
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