SEC finds no foul play in Facebook IPO

Confidential probe shows pattern of full disclosure

Tags: Facebook IncorporationUSA
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SEC finds no foul play in Facebook IPO Findings should help Facebook fend off civil suits filed by retail investors. (Getty Images)
By  Stephen McBride Published  October 21, 2012

No evidence has been found that Facebook Inc withheld vital information from investors in the runup to its May 17 IPO, reports Bloomberg.

The Securities and Exchange Commission's (SEC) confidential probe into the embarrassing debut revealed that days before trading commenced on the social media giant's stock, Facebook held private discussions with securities-firm analysts in which the lacklustre returns from mobile users were discussed. Facebook advised the lowering of earnings and profits projections to reflect mobile performance.

Also mentioned during the investigation, was a disclosure on 9 May that alerted investors that users were growing faster than the advertising delivered to them.

Retail investors were hit hard when the initial $38 share price plunged to a current value which is around half of that price. The SEC probe's initial findings may go some way to helping Facebook fight off the civil lawsuits filed by those investors, in which they accuse the social media company of selective disclosure prior to the flotation.

"It's unlikely the SEC will pursue an enforcement action against Facebook based on what they were discussing before the IPO," said Peter Henning, a former SEC lawyer who now teaches at Wayne State University in Detroit. "The SEC would have objected even more strenuously if the company had not complied."

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