Rentea v. Facebook, Inc. et al

Filing 1

PETITION to Perpetuate Testimony of Facebook, Inc., Mark Zuckerberg, David A. Ebersman, David M. Spillane, Morgan Stanley & Co., LLC, J.P. Morgan Securities, LLC and Goldman Sachs & Co.( Filing fee $ 46 receipt number 100014104), filed by Bogdan Rentea. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Civil Cover Sheet /Receipt)(klw, )

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4157

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

ALEXIS ALEXANDER, as custodian for Chloe
Sophie Alexander and ROBERT HERPST,
individually, on behalf of all others similarly
situated,

Civil Action No.

CLASS ACTION COMPLAINT

Jury Trial
Plaintiffs,
against
FACEBOOK, INC., MARK ZLJCKBRBERG,
DAVID A. EBERSMAN, DAY]]) M.
SPILLANE, MARC L. AINDREESSEN,
ERSKINE B. BOWLES, JAMES W. BREYER,
DONALD E. GRAHAM, REED HASTINGS,
PBTER A. THIEL, MORGAN STANLEY &
CO. LLC, J.P. MORGAN SECURITIES LLC,
GOLDMAN, SACHS & CO., MERRILL
LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, BARCLAYS CAPITAL
INC.,
Defendants.

Plaintiffs by their undersigned attorneys, on behalf of themselves and the class

they seek to represent, allege the following upon personal knowledge as to themselves
and their own acts, and upon information and belief as to all other matters, based upon
the investigation made by Plaintiffs' counsel, which included the review and analysis of

information obtained from numerous public sources, including inter alia: Securities and
Exchange Commission ("SEC") filings by Facebook, Inc. ("Facebook" or the
"Company"), Company press releases and media reports issued by and disseminated by
Facebook, and other publicly available information concerning Facebook.

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SUMMARY OF ACTION
1.

Facebook is a worldwide social networking company. This class action is

filed on behalf of all persons and/or entities who purchased or otherwise acquired
Facebook common stock pursuant to andlor traceable to the Company's initial public
offering (the "IPO" or the "Offering").
2.

This action arises from the materially false and/or misleading Prospectus

and Registration Statement issued in connection with the IPO.

In the Offering, the

Facebook offered for sale at $38.00 per share 421,233,615 shares of common stock, of
which 180,000,000 shares of Class A common were offered by Facebook and
241,233,615 shares of Class A common stock were offered by existing shareholders.

Based upon representations by the Company, Facebook expects to receive net proceeds

of approximately $6,764,760,000 and selling shareholders expect to receive
$9,066,041,719 from the IPO, after deducting underwriting discounts, commissions, and

offering related transaction costs.
3.

The Prospectus and Registration Statement contained materially false and

misleading statements and omitted material information in violation of Sections 11,
12(a)(2), and 15 of the Securities Act of 1933 (the "Securities Act").

JURISDICTION AND VENUE
4.
15

The claims asserted herein arise under and pursuant to

§

11, 12(a)(2), and

of the Securities Act.
5.

This Court has jurisdiction over this action pursuant to

Securities Act, 15 U.S.C.

§

77v, and 28 U.S.C. § 1331,

2

§

22 of the

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In connection with the acts and conduct alleged in this Complaint,

6.

defendants, directly or indirectly, used the means and instrumentalities of interstate
commerce, including the mails and telephonic communications and the facilities of the

NASDAQ National Securities Market ("NASDAQ").
Venue is properly laid in this District under

7.

28 U.S.C.

§

§

22 of the Securities: Act and

1391(b) and (c). The acts and conduct complained of herein occurred in

substantial part in this District and the Underwriter Defendants (as defmed below)

maintain their principal places of business in this District.

PARTIES
8.

Plaintiff Alexis Alexander, as custodian for Chloe Sophie Alexander

purchased Facebook common stock, as set forth in the certification attached hereto and
incorporated by reference and was damaged
9.

Plaintiff Robert Herpst purchased Facebook common stock, as set forth in

the certification attached hereto and incorporated by reference and was damaged.
10.

Defendant Facebook is a Delaware corporation and maintains its principal

executive offices at 1601 Willow Road, Menlo Park, California 94025.
11.

(a)

Defendant Mark Zuckerberg ("Zuckerberg") was at all relevant times,

the founder of the Company and the Chairman of the Board of Directors (the "Board") and

Chief Executive Officer ("CEO") of Facebook. Zuckerberg signed or authorized the signing

of the Company's Registration Statement filed with the SEC.
(b)

Defendant David A. Ebersman ("Ebersman") is, and was at all relevant

times, Chief Financial Officer ("CFO") of Facebook. Defendant Ebersman signed or

authorized the signing of the Company's Registration Statement filed with the SEC.

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(c)

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Defendant David M. Spillane ("Spillane") is, and was at all relevant

times, Chief Accounting Officer of Facebook. Defendant Spillane signed or authorized the

signing of the Company's the Registration Statement filed with the SEC.
(d)

Defendant Marc L. Andreessen ("Andreessen") is, and was at all

relevant times, a member of the Board of Facebook.

Defendant

Andreessen

signed

or

authorized the signing of the Company's the Registration Statement filed with the SEC.
(e)

Defendant Erskine B. Bowies ("Bowies") is, and was at all relevant

times, a member of the Board of Facebook. Defendant Bowies signed or authorized the

signing of the Company's the Registration Statement filed with the SEC.
(f)

Defendant James W. Breyer ("Breyer") is, and was at all relevant

times, a member of the Board of Facebook. Defendant Breyer signed or authorized the

signing of the Company's the Registration Statement filed with the SEC.
(g)

Defendant Donald E. Graham ("Graham") is, and was at all relevant

times, a member of the Board of Facebook. Defendant Graham signed or authorized the

signing of the Company's the Registration Statement filed with the SEC.
(h)

Defendant Reed Hastings ("Hastings") is, and was at all relevant

times, a member of the Board of Facebook. Defendant Hastings signed or authorized the
signing of the Company's the Registration Statement filed with the SEC.
(i)

Defendant Peter A. Thiel ("Thiel") is, and was at all relevant times, a

member of the Board of Facebook. Defendant Thiel signed or authorized the signing of the
Company's the Registration Statement filed with the SEC.
U)

The Defendants listed above at ¶1 l(a)-(i) are collectively referred to

herein as the "Individual Defendants."

ri

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By reason of their management positions and their ability to make public

statements in the name of the Company, the Individual Defendants were and are controlling

persons, and had the power and influence to cause and did cause the Company to engage in
the conduct complained of in this Complaint.
13.

Defendant Morgan Stanley & Co. LLC ("Morgan Stanley") served as

underwriter to Facebook in connection with the Offering.
14.

Defendant J.P. Morgan Securities LLC ("J.P, Morgan") served as an

underwriter to Facebook in connection with the Offering.
15.

Defendant Goldman, Sachs & Co. ("Goldman Sachs") served as an

underwriter to Facebook in connection with the Offering.
16.

Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill

Lynch") served as an underwriter to Facebook in connection with the Offering.
17.

Defendant Barclays Capital Inc. ("Barclays") served as an underwriter to

Facebook in connection with the Offering.
18.

Morgan Stanley, J.P. Morgan, Goldman Sachs, Merrill Lynch, and

Barclays served as lead underwriters of the IPO.. Morgan Stanley, J.P. Morgan,
Goldman Sachs, Merrill Lynch and Barclays are collectively referred to as the

"Undewriter Defendants."
SUBSTANTIVE ALLEGATIONS
19.

On or about February 1, 2012, Facebook filed a registration statement with

the SEC on Form S-i. The Company repeatedly amended the Form 5-1. On or about May
16, 2012, the Company filed with the SEC a Form

"Registration Statement'), for the IPO,

I

S-i/A Registration Statement (the

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On or about May 18, 2012, the Prospectus (the "Prospectus") with respect

to the IPO, which forms part of the Registration Statement, became effective and 421

million shares of Facebook common stock were sold to the public at $38 per share, thereby
valuing the total size of the TPO at more than $16 billion.
21.

On May 19, 2012, Henry Blodget published an article entitled, "If This

Really Happened DuringThe Facebook IPO, Buyers Should Be Mad As Hell..." The
article, in relevant part, stated:
Part way through the Facebook IPO roadshow, scattered reports
appeared that Fácebook had reduced the earnings guidance it was giving
research analysts. This seemed bizarre on a number of levels.
First, I was unaware that Facebook had ever issued any earnings
guidance--to research analysts or anyone else.
Earnings guidance is highly material information (meaning that any
investor considering an investment decision would want to know it). It
represents a future forecast made by the company. Any time any
company gives any sort of forecast, stocks move--because the forecast
offers a very well informed view of the future by those who have the
most up-to-date information about a company's business.
So if Facebook had issued any sort of guidance, even quietly, this should
have been made very public by the company and its bankers--especially
because millions of individual investors were thinking of buying the
stock.

Second, if Facebook really had "reduced guidance" mid-way through a
series of meetings designed for the sole purpose of selling the stock this

would have been even more highly material information.
Why?
Because such a late change in guidance would mean that Facebook's
business was deteriorating rapidly--between the start of the roadshow
and the middle of the roadshow,

Any time a business outlook deteriorates that rapidly, alarm bells start
going off on Wall Street, and stocks plunge.
So the report that Facebook had "reduced earnings guidance" during the
roadshow just seemed like a typical misunderstanding between Wall

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Street and the public-something lost in translation between what a
reporter was hearing from sources and what actually made it into print.

But now Reuters has just reported the same thing again. Here's a
sentence from a story Reuters just published on the IPO:
Facebook also altered its guidance for research earnings last week,
during the road show, a rare and disruptive move.
Hmmm.

If this really happened, anyone who placed an order for Facebook who
was unaware that 1) Facebook had issued any sort of earnings guidance,
and 2) reduced that guidance during the roadshow, has every right to be
furious.

Because this would have been highly material information that some
investors had and others didn't--the exact sort of unfair asymmetry that
securities laws are designed to prevent.
This seems so obvious that I'm still very skeptical of the report. I'll now
look into it. In the meantime, if anyone knows what Facebook did and
didn't tell analysts, I'd be grateful for your help.

22.

On this news, shares of Facebook's stock declined $4.20 per share, a

10.99% to close on May 21, 2012, at $34.03 per share.
23.

The Registration Statement and Prospectus contained untrue statements

of material facts, omitted to state other facts necessary to make the statements made not
misleading and were not prepared in accordance with the rules and regulations
governing their preparation.
24.

With regard to the Company's expectations for the second quarter of

2012, the Registration Statement and Prospectus stated, in pertinent part, as follows:

Based upon our experience in the second quarter of 2012 to date, the trend
we saw in the first quarter of [daily active users] increasing more rapidly
than the increase in number of ads delivered has continued. We believe this
trend is driven in part by increased usage of facebook on mobile devices
where we have only recently begun showing an immaterial number of
sponsored stories in News Feed, and in part due to certain pages having
fewer ads per page as a result of product decisions.

'4

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In describing the risks related to Facebook' s business and industry, the

Registration Statement purported to warn that the Company's revenues could be

negatively affected by the rate of growth in mobile users of its site or app. The
Registration Statement and Prospectus stated in pertinent part as follows:
Growth in use of Facebook through our mobile products, where our ability
to monetize is unproven, as a substitute for use on personal computers may
negatively affect our revenue and financial results.
We had 488 million [monthly active users] who used facebook
mobile products in March 2012. While most of our mobile users also accçss
Facebook through personal computers, we anticipate that the rate of growth
in mobile usage will exceed the growth in usage through personal
computers for the foreseeable future, in part due to our focus on developing
mobile products to encourage mobile usage of Facebook. We have
historically not shown ads to users accessing Facebook through mobile apps
or our mobile website. In March 2012, we began to include sponsored
stories in users' mobile News Feeds. However, we do not cunently directly
generate any meaningful revenue from the use of Facebook mobile
products, and our ability to do so successfully is unproven. We believe this
increased usage of Facebook on mobile devices has contributed to the
recent trend of our daily active users (DAUs) increasing more rapidly than
the increase in the number of ads delivered. If users increasingly access
Facebook mobile products as a substitute for access through personal
computers, and if we are unable to successfully implement monetization
strategies for our mobile users, or if we incur excessive expenses in this
effort, our financial performance and ability to grow revenue would be
negatively affected.
26.

The Registration Statement and Prospectus also purported to warn investors

that the Company's revenues from advertising could be adversely affected by, among other
things, the "increased user access to and engagement with facebook" through mobile
devices. In that regard, the Registration Statement and Prospectus stated, in pertinent part,
as follows:

We generate a substantial majority of our revenue from advertising. The
loss of advertisers, or reduction in spending by advertisers with Facebook,
could seriously harm our business.

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The substantial majority of our revenue is currently generated from
third parties advertising on facebook. In 2009, 2010, and 2011 and the first
quarter of 2011 and 2012, advertising accounted for 98%, 95%, 85%, 87%, and
82%, respectively, of our revenue. As is common in the industry, our
advertisers typically do not have long-term advertising commitments with us.
Many of our advertisers spend only a relatively small portion of their overall
advertising budget with us. In addition, advertisers may view some of our
products, such as sponsored stories and ads with social context, as
experimental and unproven. Advertisers will not continue to do business with
us, or they will reduce the prices they are willing to pay to advertise with us, if
we do not deliver ads and other commercial content in an effective manner, or
if they do not believe that their investment in advertising with us will generate
a competitive return relative to other alternatives. Our advertising revenue
could be adversely affected by a number of other factors, including:

decreases in user engagement, including time spent on Facebook;

increased user access to and engagement with Facebook through our
mobile products, where we do not currently directly generate
meaningthl revenue, particularly to the extent that mobile engagement
is substituted for engagement with Facebook on personal computers
where we monetize usage by displaying ads and other commercial
content;

product changes or inventory management decisions we may make
that reduce the size, frequency, or relative prominence of ads and
other commercial content displayed on Facebook;
our inability to improve our analytics and measurement solutions that
demonstrate the value of our ads and other commercial content;
decisions by advertisers to use our free products, such as Facebook
Pages, instead of advertising on Facebook;
loss of advertising market share to our competitors;

adverse legal developments relating to advertising, including legislative and r
regulatory developments and developments in litigation;
adverse media reports or other negative publicity involving us, our Platform
developers, or other companies in our industry;
our inability to create new products that sustain or increase the value of
our ads and other commercial content;

the degree to which users opt out of social ads or otherwise limit the
potential audience of commercial content;

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changes in the way online advertising is priced;

the impact of new technologies that could block or obscure the display of
our ads and other commercial content; and
the impact of macroeconomic conditions and conditions in the advertising
industry in general.
The occurrence of any of these or other factors could result in a reduction
in demand for our ads and other commercial content, which may reduce the
prices we receive for our ads and other commercial content, or cause advertisers
to stop advertising with us altogether, either of which would negatively affect
our revenue and financial results.

The statements referenced above in ¶f24-26 were untrue statements

27.

of

material fact. The true facts at the time of the IPO were that Facebook was then experiencing

a severe and pronounced reduction in revenue growth due to an increase of users

of its

Facebook app or website through mobile devices rather than a traditional PC such that the
Company told the Underwriter Defendants to materially lower their revenue forecasts for
2012. And, defendants failed to disclose that during the roadshow conducted in connection

with the IPO, certain of the Underwriter Defendants reduced their second quarter and full
year 2012 performance estimates for Facebook, which revisions were material information
which was not shared with all Facebook investors, but rather, was selectively disclosed by
defendants to certain preferred investors and omitted from the Registration Statement and/or
Prospectus.

On May 19, 2012, in an article entitled "Morgan Stanley Was A Control

28.

Freak On Facebook IPO - And It May Have Royally Screwed Itself," Reuters reported that

"Facebook.

.

.

altered its guidance for research earnings last week, during the road

show, a rare and disruptive move."

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On May 22, 2012, in an article entitled "Insight: Morgan Stanley cut

Facebook estimates just before IPO," Reuters reported that that Facebook's lead
underwriters, Morgan Stanley, JP Morgan and Goldman Sachs, all cut their earnings

forecasts for the Company in the middle of the IPO roadshow and that only a handful

of

preferred investor clients were told the news of the reduction. In that regard, the article
stated, in pertinent part, as follows:
In the run-up to Facebook's $16 billion IPO, Morgan Stanley, the lead
underwriter on the deal, unexpectedly delivered some negative news to
major clients: The bank's consumer Internet analyst, Scott Devitt, was
reducing his revenue forecasts for the company.

The sudden caution very close to the huge initial public offering,
and while an investor roadshow was underway, was a big shock to some,
said two investors who were advised of the revised forecast.

They say it may have contributed to the weak performance of
Facebook shares, which sank on Monday - their second day of trading - to
end 10 percent below the IPO price. The $38 per share IPO price valued
Facebook at $104 billion.
The change in Morgan Stanley's estin-iates came on the heels of
Facebook's filing of an amended prospectus with the U.S. Securities and
Exchange Commission (SEC), in which the company expressed caution
about revenue growth due to a rapid shift by users to mobile devices.
Mobile advertising to date is less lucrative than advertising on a desktop.
"This was done during the roadshow - I've never seen that before in
10 years," said a source at a mutual fund firm who was among those called
by Morgan Stanley.
JPMorgan Chase and Goldman Sachs, which were also major
underwriters on the 120 but had lesser roles than Morgan Stanley, also
revised their estimates in response to Facebook's May 9 SEC filing,
according to sources familiar with the situation.
Morgan Stanley declined to comment and Devitt did not return a
phone message seeking comment. JPMorgan and Goldman both declined to
comment.
Typically, the underwriter of an [P0 wants to paint as positive a
picture as possible for prospective investors. Investment lank analysts, on
the other hand, are required to operate independently of the bankers and
salesmen who are marketing stocks - that was stipulated in a settlement by

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major banks with regulators following a scandal over tainted stock research
during the dotcom boom.
The people familiar with the revised Morgan Stanley projections
said Devitt cut his revenue estimate for the current second quarter
significantly, and also cut his full-year 2012 revenue forecast. Devitt's
precise estimates could not be immediately verified.
"That deceleration freaked a lot of people out," said one of the investors.
Scott Sweet, senior managing partner at the research firm IPO
Boutique, said he was also aware of the reduced estimates.
"They definitely lowered their numbers and there was some concern
about that," he said. "My biggest hedge fund client told me they lowered
their numbers right around mid-roadshow."

That client, he said, still bought the issue but "flipped his IPO
allocation and went short on the first day."
"VERY UNUSUAL"

Sweet said analysts at firms that are not underwriting IPOs often
change forecasts at such times. However, he said it is unusual for analysts at
lead underwriters to make such changes so close to the IPO,
"That would be very, very unusual for a book runner to do that," he said.
The lower revenue projection came shortly before the IPO was
priced at $38 a share, the high end of an already upwardly revised projected
range of $34$38, and before Facebook increased the number of shares being
sold by 25 percent.

The muchanticipated IPO has performed far below expectations,
with the shares barely staying above the $38 offer price on their Friday
debut and then plunging on Monday.

Companies do not make their own financial forecasts prior to an
IPO, and underwriters are generally barred from issuing reconunendations
on the stock until 40 days after it begins trading. Analysts often rely on
guidance from the company in building their forecasts, but companies doing
[POs are not permitted to give out material information that is not available
to all investors.
Institutions and major clients generally enjoy quick access to
investment bank research, while retail clients in many cases only get it later.
It is unclear whether Morgan Stanley only told its top clients about the
revised view or spread the word more broadly. The firm declined to
comment when asked who was told about the research.

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"It's very rare to cut forecasts in the middle of the IPO process,' said
an official with a hedge fund firm who received a call from Morgan Stanley
about the revision.

30.

As

of the date of the filing of this complaint, the 421 million shares of

Facebook common stock sold in the IPO are trading at approximately $31 per share, or $7

per share below the price where plaintiff and the Class purchased $16 billion worth of
Facebook stock while defendants pocketed billions of dollars. Plaintiff and the Class have
suffered losses of more than $2.5 billion since the IPO.

CLASS ACTION ALLEGATIONS
31.

Plaintiffs bring this action as a class action pursuant to Federal Rules of

Civil Procedure 23(a) and 23(b)(3) on behalf of all those who purchased the commOn stock

of Facebook pursuant and/or traceable to the Company's IPO. Excluded from the Class are
defendants herein, members of the immediate family of each of the defendants, any person,

firm, trust, corporation, officer, director or other individual or entity in which any defendant

has a controlling interest or which is related to or affiliated with any of the defendants, and

the legal representatives, agents, affiliates, heirs, successors-in-interest or assigns of any
such excluded party.
32.

The members of the Class are so numerous that joinder

of all members is

impracticable. Facebook sold more than 421 million shares of common stock in the IPO.
The precise number of Class members is unknown to Plaintiffs at this time but is believed

to be in the thousands. In addition, the names and addresses of the Class members can be
ascertained from the books and records of Facebook or its transfer agent or the underwriters
to the IPO. Notice can be provided to such record owners by a combination of published

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notice and first-class mail, using techniques and a form of notice similar to those

customarily used in class actions arising under the federal securities laws.
Plaintiffs will fairly and adequately represent and protect the interests of the

33.

members of the Class, Plaintiffs have retained competent counsel experienced in class
action litigation under the federal securities laws to further ensure such protection and
intends to prosecute this action vigorously.

Plaintiffs' claims are typical of the claims of the other members of the Class

34.

because Plaintiffs and all the Class members' damages arise from and were caused by the
same false and misleading representations and omissions made by or chargeable to

defendants. Plaintiffs do not have any interests antagonistic to, or in conflict with, the
Class.

A class action is superior to other available methods for the fair and

35.

efficient adjudication of this controversy. Since the damages suffered by individual Class

members may be relatively small, the expense and burden of individual litigation make it
virtually impossible for the Class members to seek redress for the wrongful: conduct
alleged. Plaintiffs know of no difficulty that will be encountered in the management of this
litigation that would preclude its maintenance as a class action.

Common questions of law and fact exist as to all members of the Class and

36.

predominate over any questions affecting solely individual members

of the Class Among

the questions of law and fact common to the Class are:
a.

whether the federal securities laws were violated by defendants; acts as
alleged herein;

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b. whether the Prospectus and Registration Statement issued by defendants to

the investing public in connection with the ILPO negligently omitted andlor
misrepresented material facts about Facebook and its business; and
c.

the extent of injuries sustained by members of the Class and the appropriate

measure of damages.

COUNT I

37.

Violations of Section 11 of the Securities Act
Against All Defendants
Plaintiffs repeat and reallege each and every allegation contained above.

38.

This Count is brought pursuant to §11 of the Securities Act, 15 U.S.C. §77k,

on behalf of the Class, against all defendants.
39.

The Registration Statement for the IPO was inaccurate and misleading,

contained untrue statements of material facts, omitted to state other facts necessary to make
the statements made not misleading, and omitted to state material facts required to be stated
therein.
40.

Facebook is the registrant for the IPO. The defendants named herein were

responsible for the contents and dissemination of the Registration Statement and the

Prospectus.
41.

As issuer of the common stock, Facebook is strictly liable to plaintiffs and

the Class for the misstatements and omissions.
42.

None of the defendants made a reasonable investigation or possessed

reasonable grounds for the belief that the statements contained in the Registration
Statement and the Prospectus were true and without omissions of any material facts and
were not misleading.

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Plaintiffs acquired common stock of Facebook pursuant and/or traceable to

the Registration Statement.
44.

The value of Facebook common stock has declined substantially and

Plaintiffs and the Class have sustained damages as a result of defendants' violations.
45.

Less than one week has elapsed from the time that plaintiffs discovered or

reasonably could have discovered the facts upon which this Complaint is based to the time

that Plaintiffs filed this Complaint. Likewise, less than one week has elapsed between the

time that the, securities upon which this Count is brought were offered to the public and the
time plaintiff filed this Complaint.

COUNT II
Violations of Section 12(a)(2) of the Securities Act Against All Defendants
46.

Plaintiffs repeat and reallege each and every allegation set forth above.

47.

This Count is brought pursuant to §12(a)(2) of the Securities Act, 15 U.S.C.

§771(a)(2), on behalf of the Class.
48.

Defendants were sellers and offerors and/or solicitors of purchasers of the

common stock offered pursuant to the Prospectus and Registration Statement.
49.

As set forth above, the Prospectus and Registration Statement contained

untrue statements of material fact, omitted to state other facts necessary to make the
statements made therein not misleading, and omitted to state material facts required to be
stated therein. Defendants' actions of solicitation included preparing the inaccurate and

misleading Prospectus and participating in efforts to market the IPO to investors.
50.

Defendants owed to the purchasers of Facebook common stock, including

Plaintiffs and the other Class members, the duty to make a reasonable and diligent

investigation of the statements contained in the Prospectus and Registration Statement to

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ensure that such statements were accurate and that they did not contain any misstatement or

omission of material fact, Defendants, in the exercise of reasonable care, should have

known that the Prospectus and Registration Statement contained misstatements and
omissions of material fact.
51.

Plaintiffs and the other members of the Class purchased or otherwise

acquired Facebook common stock pursuant to the Prospectus and Registration Statement,
and neither Plaintiffs nor the other Class members knew, or in the exercise of reasonable
diligence could have known, of the untruths, inaccuracies and omissions contained in the

Prospectus and Registration Statement.
52.

Plaintiffs, individually and on behalf of the Class, hereby offer to tender to

defendants those shares of common stock that Plaintiffs and the other Class members
continue to own, in return for the consideration paid for those shares together with interest
thereon. Class members who have sold their shares are entitled to rescissory damages.

COUNT Ill

53.

Violations of Section 15 of the Securities
Act Against the Individual Defendants
Plaintiffs repeat and reallege each and every allegation contained above.

54.

This Count is brought pursuant to

§ 15

of the Securities Act against the

Individual Defendants.
55.

Each of the Individual Defendants was a control person of Facebook by

virtue of his position as a director and/or senior officer of Facebook. The Individual

Defendants each had a series of direct and/or indirect business and/or personal relationships

with other directors and/or officers and/or major shareholders of Facebook.
56.

violation of

Each of the Individual Defendants was a culpable participant in the
§ 11

of the Securities Act alleged in Count I above, based on their having
17

Case 1:12-cv-04157-AJN

Document I

Filed 05/24/12

Page 18 of 20

signed the Registration Statement and having otherwise participated in the process which
allowed the IPO to be successfully completed.

PRAYER FOR RELIEF
WHEREFORE, plaintiffs pray for judgment as follows:
A.

declaring this action to be a plaintiff class action properly maintained

pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure;
awarding plaintiffs and other members of the Class damages together with

B.

interest thereon;
awarding plaintiffs and other members of the Class their costs and expenses

C.

of this litigation, including reasonable attorneys' fees, accountants' fees and experts' fees
and other costs and disbursements;

D.
§ 12(a)(2)

E.

awarding plaintiffs and other members of the Class rescission on their
claims; and

awarding plaintiffs and other members of the Class such other and further

relief as may be just and proper under the circumstances.
JURY DEMAND
Plaintiffs hereby demand a trial by jury.

May 24, 2012

BBJ17 SPANIER
& Affi&AMS LLP

Afthur N. Abbe)ffEq.
[e-mail]
Nancy Kaboolian, Esq.
nkaboolian(abbeyspanier.com
212 East 39t Street

NewYork,NY 10016
Tel.:
Fax:

212-889-3700
212-684-5191

Case 1:12-cv-04157-AJN Document

Page 19 ot2O

Fi'ed 05/24/12

1

czrncxrioi O

LEAD PLAiNTIF!
PU9SgANT TO.FEDERAL SW..URITIESLAWS
1,

Ale*Js

I). A1exader

as Cusdinthr Ch'oe Scçble Meaodur Un& the North Carolina Unithcm TThi

to Minor Act, de

I.

IdacopyofthecotindjntMgaction.

2.

Idld not purcbasc the secythath the subject of this action Pacebo&ç Inc. QasdaçPfl) atthodfrcction ofcuanad or its ore
arising under the Piiate Secm&jjtjon Refoon Act (the 'PSLRA').
articipt in
ilivafe act

3.

7 an Willing to serve as a rapusentive pertY oubeliaWofa class and Wit assrl' at deposithas sufti4 fmeceasaiy.

4.

Mytmuaactiois in the secerky that Is
Security

TTIIISEIiOII

(Coma,ois8ioC4

c subject of this

litigation during

the class period set

iith

in the complaint ar

to

us Ibliows:

quantity

(Percb)

Pw'ib)

Common

Purchase

Security

Timsasetion

(Cnmiuia Ststk1 Cal

10 shares

May 18,2012

$40.03

(Sale)

Quantity

Trade Date

Proceeds

5.

Ihave not served as er sought to serve as aupresentivc party on bthalf cfathss during the

6.

I will not accept

a'

forserding asamprescntedve party,

approved by the coertcr amy award to
representation

I

d

ofthe class.

Tare wider ponahy ofperjury that the

Dated:

Print Name:

S

Q1cs

'O /

t1laeeyea

cucept as statoj hezwin

ecEpuo receive my pro rate than of any recovery ors
meby die Court ofreasonable costs d npcuses Onchidiig lost wages) directly lethg

regotng Is true and cosreer.

or

roy

Case 1:12-cv-04157-AJN

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1

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Page 20

of

20

CERTIFICATION OF LEAD PLATNTIFF
PURSIJANT

TO FEDERAL SFJ1ThUT1ES LAWS

Robert D. Herpst, declares as Ibilows:
reviewed a copy

of the complaint filed

in this action,

1.

I have

2.

1

3.

1

4.

My transactions in the security that is the subject of this litigation during the class period set rorth in the complaint arc as follows:

did not purchase the security that is the subject of this action Faceboøk, Inc. (Nasdaq:FB) at the direction
participate in any private action arising under the Private Securities Litigation Reform Act (the 'PSLRA").

am

willing

to serve as

Security
(Common 5ncl

representative party on behalf of a class and will testify at deposLtion and tria

a

Quantity

Transaction

Trade Date

of counsel or iii order to

if necessary.

Price Paid

(Purchase)

Call.

pit,Uond)

Common

400 shares

Purchase

Security

Quantity

Transaction

(Common Stnck. Call.
Put, 8nnd)

May 18, 2012

S

16,260.95

(Sale)

Common

5.

I

6.

1

400

Sold

shares

Trade Date

May

21, 2012

Proceeds

1_82.t4_

have not served as or soughtto serve as a representative party on behalf of a class during the last three years, except as stated herein:
Blank v, Jacobs Case No. 03-2 I 11 (EDNY)

will not accept any payment for serving as a representative party, except to receive my

approved by the court or any award to me by the Court
representation of the class.

of reasonable costs

declare under penalty of perjury that the foregoing is true and

Dated: May

Print Name:

23, 2012

/O8e7

1).

corrct.

d

expense

of any recovery or as ordered or
ing lost wages) directly relating tol'fly
share