Judge: Facebook, Zuckerberg and banks should face lawsuit for ‘misleading investors’

Investors could pursue a lawsuit accusing Facebook, its founder Mark Zuckerberg, and several banks of misleading them prior to the social media company's initial public offering in May 2012, a federal judge has said.

US District Judge Robert Sweet said that Facebook did not disclose internal revenue projections that would have revealed how increased mobile usage could have led to a reduction in revenue. The company "used generalised and indefinite terms" when describing this trend.

In an 83 page decision, Sweet wrote: "The company's purported risk warnings misleadingly represented that this revenue cut was merely possible when, in fact, it had already materialized.

"Plaintiffs have sufficiently pleaded material misrepresentation(s) that could have and did mislead investors regarding the company's future and current revenues."

Facebook's underwhelming IPO saw shares fall from their offering price of $38 (£23) and remain there for over a year. Following the IPO Zuckerberg said that Facebook's future performance would be determined by "how well we do with mobile".

The idea that Facebook negligently concealed information from its IPO registration statement concerning the mobile market has been refuted by the company.

"We continue to believe this suit lacks merit and look forward to a full airing of the facts," Facebook said in a statement.

Leading US investment firm Morgan Stanley was recently fined $5 million (£3 million) by a US securities regulator for its "improper" actions regarding Facebook's IPO. It was reported that a Facebook official had told Morgan Stanley that it was anticipating lower than expected quarterly and annual figures as a result of increased mobile usage.