Facebook and Mark Zuckerberg sued after stock crash 'shocked' market

Facebook and Mark Zuckerberg sued after stock crash 'shocked' market
PHOTO: AFP

NEW YORK - Facebook Inc and its chief executive Mark Zuckerberg were sued on Friday (July 27) in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about US$120 billion (S$163.43 billion) of shareholder wealth.

The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Mr 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.

Mr 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 spokesman 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.

Facebook's shares fell 20 per cent on Thursday and $150 billion was wiped off its market value but it remains the dominant social media player.

Thursday's plunge also hit Mr Zuckerberg's bottom line.

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

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

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

The case is Kacouris v Facebook Inc et al, US District Court, Southern District of New York, No. 18-06765.

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