Facebook Inc (NASDAQ:FB) has been doing better of late. Despite Zynga Inc (NASDAQ:ZNGA)’s most recent troubles, the company has won investors over with its new attempts at monetization. It appeared for the last few weeks that the company was finally over the troubles caused by its IPO. Not so, according to today’s news.
All of the legal cases that have been brought against Facebook Inc (NASDAQ:FB), and the Nasdaq exchange,were results of the company’s botched initial public offering. These cases have now been consolidated. The move was ordered by a panel of Federal judges today.
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Facebook’s initial public offering was plagued by accusations of improper trading, as well as assertions that stock was bought at the wrong prices, because of flaws in the Nasdaq trading system. For weeks after the trades went through, rumors that information was improperly supplied to privileged clients persisted.
Now, all of the problems that circled around the biggest IPO of the decade, will be fought out in the same court room. That room belongs to U.S. District Judge Robert Sweet, a judge in Manhattan. It was Facebook that requested the transfer.
The consolidation of the cases will simplify matters for Facebook Inc (NASDAQ:FB), and the Nasdaq exchange. Investors will be happy with the reduced legal costs, brought about by fighting all of the cases in a single court room.
The proceedings are still likely to be very time and money consuming. If found guilty, Facebook Inc (NASDAQ:FB) could be forced to pay large sums in compensation to those affected by the trading problems. The liability on the part of the Nasdaq exchange is, quite possibly, even greater.
The NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) submitted a compensation package to the Securities and Exchange Commission in June, in an attempt to appease troubled investors. That package was not seen as overly generous by many investors and lawsuits continued to be brought against the firm.
One of the major problems associated with the compensation package submitted by NASDAQ OMX Group, Inc. (NASDAQ:NDAQ), was the fact that it sent money into the hands of the trading companies, without restrictions on which investors they should pay the compensation out to.
One of the most enduring complaints about the Facebook Inc IPO, was that it was a two tiered trade. Retail investors who were outside the loop were duped into buying the shares at an inflated value, while those chosen by the underwriters to succeed, were told not to buy at those prices.
Whether or not this is in fact true, there is no doubt that the Facebook Inc (NASDAQ:FB) marked a large flow of value out of the hands of ordinary investors, and into the pockets of the large firms that were chosen to underwrite the event.
The claims of the plaintiffs will be contested in what is sure to be a vicious, and very public, legal battle. The combination of stock market shenanigans and a company that the entire world knows, makes for an epic battle that will rage across the face of media as it unfolds.
No date has been set for the case yet, and several stages, setting up the proceeding, will have to be completed, before the arguments of the attorneys begin.That process could take months, and the resultant cases could go on for years, depending on the objectives of the parties.
Facebook’s future will not likely rest on the outcome of these lawsuits, but its image in the public might be badly tarnished. If the most nefarious of the claims are true, the firm’s executives could end up paying for their alleged crimes.
Facebook Inc (NASDAQ:FB)’s current graceful path is unlikely to be altered by this news. But, investors will need to monitor the proceedings closely in order to avoid being caught out.