Facebook investors have filed a class action lawsuit against the social network’s co-founder Mark Zuckerberg, alleging that he had inside information that the company’s stock was overvalued that led to his dumping of shares ahead of their post-IPO collapse.
According to TMZ, the suit alleged that Zuckerberg hid from most investors the fact that the Facebook business model was not built to sustain enough advertising revenue to support an IPO price of 38 dollars a share.
Underwriters Morgan Stanley, J.P. Morgan Chase, and Goldman Sachs all warned Zuckerberg before the IPO that the company was overvalued, but that the information was ‘selectively disclosed’ to only the social network’s largest investors, the lawsuit added.
Meanwhile, Facebook’s stock fell three percent overnight and closed this morning at a new low.
The firm’s shares slid 82 cents to close at 26.90 dollars, after briefly trading as low as 26.44 dollars.
Facebook shares have fallen nearly 30 per cent since their May 18 debut.
