After Facebook Inc(NASDAQ:FB)’s stock fell following its IPO in May, an inquiry was made by the Securities and Exchange Commission to ensure that no information was withheld from investors, but the social network is apparently clean of any such charge. The probe is still on and IPO-related issues are being analyzed such as brokers providing misleading information to retail investors or Facebook bankers not being transparent enough to analysts about mobile applications.
John Coffee of
states that plaintiffs are stressing that analysts were demeaning Facebook
before the IPO as selective disclosures were being made regarding mobile apps.
Facebook’s statement does not contain any such fact that alludes to issues with
mobile apps, so a material proof will be needed. Columbia University
Assistant Director Barbara Jacobs, head of the SEC disclosure team, asked Facebook a couple of months before the offering, to state clearly about its plans to earn money through mobile customers and also the figure that they make per user. Facebook was asked to eradicate all false statements regarding its appeal advertisers.
Securities-firm analysts were instructed in private by Facebook some days before the offering that they should reduce earnings and profit predictions due to the dismal revenue from mobile customers. In fact, a disclosure in early May reported that the growth rate of users was higher than advertising delivered to them. If the social network had given a generalized view to analysts, then there is nothing wrong with it, but asking analysts to predict according to a particular trend or data might raise issues.
There are certain restrictions governing the information that Facebook can share with analysts. According to SEC rules, data on sales, ads that they’ve previously shared with consultants or reporters, business strategies without inside information etc. are some of the facts that can be shared as they don’t predict future trends or forecasts. Currently, the Senate Banking Committee is also involved and has been in discussions with parties like Facebook, Nasdaq, Morgan Stanley, and the SEC.