Facebook, Chief Executive Mark Zuckerberg and dozens of banks must face a lawsuit accusing the social media company of misleading investors about its health before its $16 billion initial public offering, a federal judge said.
In a decision made public on Wednesday, U.S. District Judge Robert Sweet in Manhattan said investors could pursue claims that Facebook should have prior to its May 2012 IPO disclosed internal projections on how increased mobile usage and product decisions might reduce future revenue.
"The company's purported risk warnings misleadingly represented that this revenue cut was merely possible when, in fact, it had already materialized," Sweet wrote in his 83-page decision. "Plaintiffs have sufficiently pleaded material misrepresentation(s) that could have and did mislead investors regarding the company's future and current revenues."
In a statement, Facebook said: "We continue to believe this suit lacks merit and look forward to a full airing of the facts."