Case 1:12-cv-04081-RWS Document 98 Filed 02/28/13 Page 1 of 95
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`MDL No. 12-2389 (RWS)
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`CONSOLIDATED CLASS ACTION
`COMPLAINT
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`JURY TRIAL DEMANDED
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`This document relates to the
`Consolidated Securities Action:
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`No. 12-cv-4081
`No. 12-cv-4763
`No. 12-cv-4099
`No. 12-cv-4777
`No. 12-cv-4131
`No. 12-cv-5511
`No. 12-cv-4150
`No. 12-cv-7542
`No. 12-cv-4157
`No. 12-cv-7543
`No. 12-cv-4184
`No. 12-cv-7544
`No. 12-cv-4194
`No. 12-cv-7545
`No. 12-cv-4215
`No. 12-cv-7546
`No. 12-cv-4252
`No. 12-cv-7547
`No. 12-cv-4291
`No. 12-cv-7548
`No. 12-cv-4312
`No. 12-cv-7550
`No. 12-cv-4332
`No. 12-cv-7551
`No. 12-cv-4360
`No. 12-cv-7552
`No. 12-cv-4362
`No. 12-cv-7586
`No. 12-cv-4551
`No. 12-cv-7587
`No. 12-cv-4648
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`IN RE FACEBOOK, INC., IPO SECURITIES
`AND DERIVATIVE LITIGATION
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`Case 1:12-cv-04081-RWS Document 98 Filed 02/28/13 Page 2 of 95
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`TABLE OF CONTENTS
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`Page
`INTRODUCTION .............................................................................................................. 2 
`JURISDICTION AND VENUE ......................................................................................... 9 
`PARTIES .......................................................................................................................... 10 
`A. 
`Lead Plaintiffs ....................................................................................................... 10 
`B. 
`Named Plaintiffs ................................................................................................... 11 
`C. 
`Defendants ............................................................................................................ 12 
`1. 
`Corporate Defendant ................................................................................. 12 
`2. 
`The Individual Defendants ........................................................................ 12 
`3. 
`The Underwriter Defendants ..................................................................... 15 
`OVERVIEW ..................................................................................................................... 18 
`Facebook’s Meteoric Rise Creates Unprecedented Market Anticipation
`A. 
`For Its IPO............................................................................................................. 18 
`Facebook Files For Its IPO, And The Market Reacts Positively To Its Disclosures
`Concerning Its Revenue, Growth, And Positioning In The Mobile Market ......... 20 
`The SEC Questions Facebook’s Disclosures ........................................................ 23 
`As Facebook Prepares For Its Roadshow, The Company Continues To
`Emphasize Its Growth Prospects In The Mobile Market To Investors ................. 24 
`As Facebook Begins Its Roadshow, It Determines That Its Revenues For The
`Second Quarter And The Year Have Been Materially Impacted ......................... 30 
`Facebook Discloses Its Severe Revenue Declines To A Select Group Of Investors,
`But Not To The Market ......................................................................................... 33 
`G.  With The Market Unaware Of The Pronounced Deterioration In Facebook’s
`Revenue, Facebook Increases The Price And Size Of The Offering, And
`Allocates An Extremely High Number Of Shares To Small Investors ................ 39 
`Facebook Conducts Its Historic IPO..................................................................... 43 
`Facebook’s Market Debut Fizzles As Morgan Stanley Is Forced To Desperately
`Prop Up The Company’s Stock Price To Prevent A “Broken Issue” ................... 45 
`Facebook Stock Collapses On Monday And Tuesday As The Truth Emerges .... 48 
`The Financial Media Acknowledges That The Declines In Facebook’s Revenue
`Estimates Were Not Conveyed By Facebook’s Public Disclosures, And
`Significantly Altered The Total Mix Of Information ........................................... 52 
`THE NEGATIVE CHANGE IN FACEBOOK’S REVENUE ESTIMATES
`SIGNIFICANTLY ALTERED THE TOTAL MIX OF INFORMATION IN THE
`MARKETPLACE ............................................................................................................. 54 
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`B. 
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`C. 
`D. 
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`E. 
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`F. 
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`H. 
`I. 
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`J. 
`K. 
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`I. 
`II. 
`III. 
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`IV. 
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`V. 
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`i
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`IX. 
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`VI.  MATERIALLY UNTRUE AND MISLEADING STATEMENTS
`AND OMISSIONS ........................................................................................................... 59 
`VII.  CLASS ACTION ALLEGATIONS ................................................................................. 67 
`VIII.  THE INAPPLICABILITY OF THE STATUTORY SAFE HARBOR AND
`BESPEAKS CAUTION DOCTRINE .............................................................................. 69 
`CAUSES OF ACTION ..................................................................................................... 70 
`COUNT I .......................................................................................................................... 70 
`For Violations Of Section 11 Of The Securities Act (Against Defendants
`Zuckerberg, Ebersman, Spillane, The Facebook Board, And The
`Underwriter Defendants)  
`COUNT II ......................................................................................................................... 72 
`For Violations Of Section 12(a)(2) Of The Securities Act (Against Facebook,
`Defendants Zuckerberg, Sandberg, and Ebersman,
`and The Underwriter Defendants)  
`COUNT III ........................................................................................................................ 75 
`For Violations Of Section 15 Of The Securities Act (Against the Individual
`Defendants)  
`PRAYER FOR RELIEF ................................................................................................... 77 
`JURY TRIAL DEMANDED ............................................................................................ 77 
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`X. 
`XI. 
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`ii
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`1.
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`Court-appointed Lead Plaintiffs, the North Carolina Department of State
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`Treasurer on behalf of the North Carolina Retirement Systems, Banyan Capital Master Fund
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`Ltd., Arkansas Teacher Retirement System, and the Fresno County Employees’ Retirement
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`Association (collectively, “Lead Plaintiffs”), and Named Plaintiffs Jose G. Galvan and Mary Jane
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`Lule Galvan, bring this action individually and on behalf of all persons and entities who
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`purchased or otherwise acquired the Class A common stock of Facebook, Inc. (“Facebook” or the
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`“Company”) in or traceable to Facebook’s initial public offering (the “IPO”), which occurred on
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`or about May 17, 2012, and were damaged thereby (collectively, the “Class”). Excluded from
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`the Class are Defendants (as set forth herein), present or former executive officers of Facebook
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`and their immediate family members (as defined in 17 C.F.R. § 229.404, Instructions (1)(a)(iii)
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`and (1)(b)(ii)).
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`2.
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`Lead Plaintiffs allege the following based upon personal knowledge as to
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`themselves and their own acts and upon information and belief as to all other matters. Lead
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`Plaintiffs’ information and belief is based on, inter alia, the independent investigation of Court-
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`appointed Co-Lead Counsel, Bernstein Litowitz Berger & Grossmann LLP and Labaton
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`Sucharow LLP. This investigation included, but was not limited to, a review and analysis of: (i)
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`public filings with the Securities and Exchange Commission (“SEC”) by Facebook; (ii) research
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`reports by securities and financial analysts; (iii) transcripts of investor conference calls; (iv)
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`publicly available presentations by Facebook; (v) press releases and media reports; (vi) economic
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`analyses of securities movement and pricing data; (vii) publicly available filings in the legal
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`action brought against Morgan Stanley & Co. LLC by the Massachusetts Securities Division (the
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`“Massachusetts Enforcement Action”); (viii) consultations with relevant experts; and (ix) other
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`publicly available material and data identified herein. Co-Lead Counsel’s investigation into the
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`factual allegations contained herein is continuing, and many of the relevant facts are known only
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`by the Defendants named herein, or are exclusively within their custody or control. Lead
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`Plaintiffs believe that substantial additional evidentiary support will exist for the allegations set
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`forth herein after a reasonable opportunity for further discovery.
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`3.
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`As set forth further below, the claims asserted herein arise solely under the
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`Securities Act of 1933 (the “Securities Act”). These Securities Act claims are based solely on
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`strict liability and negligence, and are not based on any reckless or intentionally fraudulent
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`conduct by or on behalf of the Defendants – i.e., these claims do not allege, arise from, or sound
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`in, fraud. Lead Plaintiffs specifically disclaim any allegation of fraud, scienter, or recklessness in
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`these non-fraud Securities Act claims.
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`I.
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`INTRODUCTION
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`4.
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`This case is about the integrity of the market for initial public offerings.
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`Facebook, the world’s largest online social network, conducted one of the biggest and most
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`highly anticipated initial public offerings in history on May 17, 2012. In the offering, Facebook
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`and its insiders sold more than 421 million shares of common stock to the investing public at $38
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`per share, reaping more than $16 billion in proceeds – the largest initial public offering ever
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`conducted by a technology company, and the third-largest ever conducted in the United States by
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`any company.
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`5.
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`A key factor influencing the value of Facebook’s stock was its ability to generate
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`large and rapidly growing amounts of revenue through its core advertising business. Thus, the
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`Registration Statement pursuant to which Facebook conducted its IPO repeatedly represented
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`that the Company had experienced “rapid growth,” stating, for example, that its annual revenues
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`had increased from approximately $150 million to more than $3.7 billion in the four years before
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`its IPO. In the months and weeks leading up to the IPO, the financial press repeatedly reported
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`that the Company’s revenue growth had created “extraordinary” and “astronomical” demand for
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`its IPO, and that Facebook was “a must-own stock.”
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`6.
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`On April 16, 2012, as Facebook was preparing to market the IPO to institutional
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`investors through its roadshow, the Company’s CFO, Defendant David Ebersman, provided
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`revenue guidance to the analysts from the investment banks that were underwriting the IPO (the
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`“Syndicate Analysts”). Ebersman informed the Syndicate Analysts that Facebook was estimating
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`that it would report revenue of as much as $1.2 billion for the second quarter of 2012 – the
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`quarter in which Facebook was going public – and $5 billion for the year. Based on Facebook’s
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`guidance, the Syndicate Analysts generated revenue estimates that mirrored the figures Ebersman
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`had provided, and provided their estimates to the large clients of their investment banks that were
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`considering investing in the IPO.
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`7.
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`Over the next three weeks, however, Facebook’s revenues began to rapidly
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`deteriorate. Indeed, by no later than May 7, 2012, the day that Facebook began its roadshow in
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`New York, the Company determined that two developments within its core advertising business
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`had materially impaired its ability to generate revenue for both the second quarter of 2012 and
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`the full year.
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`8.
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`The first and most damaging change concerned a shift in the way that users
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`accessed Facebook. In particular, Facebook had determined that its users were increasingly
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`accessing Facebook through mobile devices, such as mobile phones, instead of through
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`traditional desktop computers, and that this had materially impaired the Company’s ability to
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`generate revenue. That is because Facebook displayed large amounts of advertising to its
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`desktop users, but displayed much less advertising to its mobile users. Thus, as Facebook’s users
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`shifted from desktop computers to mobile devices, the Company was generating far less
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`advertising revenue than it had expected.
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`9.
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`At the same time that Facebook determined that its users were increasingly
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`migrating to mobile devices, Facebook also determined that certain “product decisions” it had
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`made – such as decisions concerning the type of the advertisements it displayed – had
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`compounded the steep decline in its expected revenue. In particular, the Company’s product
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`decisions had reduced the number of advertisements per page that Facebook displayed to its
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`users, thereby exacerbating the deterioration in the Company’s advertising revenue caused by the
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`shift to mobile devices.
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`10.
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`As a direct result, ten days before the IPO was scheduled to occur, Facebook
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`drastically slashed the revenue estimates it had provided to the Syndicate Analysts only three
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`weeks earlier. Specifically, by no later than May 8, 2012, Facebook cut its estimated revenue for
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`the second quarter of 2012 by as much as $100 million, or more than 8.3%, and for the year by
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`as much as $175 million, or 3.5%.
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`11.
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`Facebook’s most senior executives immediately recognized that the pronounced
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`deterioration in Facebook’s revenue was highly material. The same day that Facebook cut its
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`revenue estimates, Defendant Ebersman and the head investment banker on the IPO, Michael
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`Grimes of lead underwriter Morgan Stanley, concluded that the decline in Facebook’s revenue
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`was so significant that Facebook had to promptly disclose its lowered revenue estimates.
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`However, rather than publicly disclose this information, Facebook decided to disclose it only to a
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`handful of its largest and most significant potential investors. Thus, on May 9, Facebook filed an
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`amended Registration Statement in which it misleadingly represented that the two factors noted
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`above might have a negative impact on its revenues. Specifically, in its amended Registration
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`Statement, Facebook merely stated that, as a result of increasing mobile usage and the
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`Company’s product decisions, the Company’s users were growing more quickly than the number
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`of ads that company was displaying to them. At no time, however, did the Registration
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`Statement disclose that the Company’s revenues had been negatively impacted by these factors.
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`To the contrary, the amended Registration Statement stated only that these factors “may
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`negatively affect our revenue and financial results” – the exact same information the Company
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`had disclosed prior to determining that they had negatively impacted its revenue and financial
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`results. Accordingly, the warnings themselves in the amended Registration Statement constituted
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`false statements.
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`12.
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`The actions that Facebook’s own senior officers took after the amended
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`Registration Statement was filed confirm that they understood that the information regarding the
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`declines in Facebook’s revenues was highly material, not conveyed by the amended Registration
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`Statement, and not otherwise part of the total mix of information in the market. Thus, beginning
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`on the evening of May 9 – only twelve minutes after Facebook filed the amended Registration
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`Statement – Facebook’s Treasurer, Cipora Herman, began to conduct nineteen separate telephone
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`calls with the Syndicate Analysts. Each of these calls had the same purpose: to inform the
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`Syndicate Analysts of the material facts which the Registration Statement had not disclosed. On
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`these calls, Herman read from a script prepared by Grimes, and told the Syndicate Analysts that
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`the two factors discussed above had already materially impaired Facebook’s revenue for the
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`second quarter and year, and that, as a result, Facebook had sharply lowered the revenue
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`estimates it had given them only three weeks earlier.
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`13.
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`As Facebook knew they would, the Syndicate Analysts immediately lowered their
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`own internal estimates for Facebook’s revenue to mirror Facebook’s revised guidance, and
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`5
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`communicated these lowered estimates to a small, select group of institutions that were
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`considering investing in the IPO. The Syndicate Analysts did not issue any public reports with
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`respect to their lowered estimates of Facebook prior to the completion of the IPO.
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`14.
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`The few institutions who received this information immediately recognized that it
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`was new, material information that reflected a highly negative change in Facebook’s financial
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`condition. As Reuters would subsequently report after the IPO, these institutions said that the
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`Syndicate Analysts’ decision to reduce their estimates during the time period when the roadshow
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`was occurring was “very, very unusual,” and they had “never before seen that in 10 years.”
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`Similarly, according to Reuters and The Wall Street Journal, the few investors who were told of
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`the revenue declines were “shocked” by the “deceleration” in Facebook’s revenues, which raised
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`a “significant red flag” about Facebook’s ability to generate the level of revenue that the market
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`expected, and called the Company’s value into serious question. Indeed, institutions that
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`received this non-public information cancelled or cut their orders for Facebook shares, dropped
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`the price they were willing to pay, or sold their shares immediately after the IPO.
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`15.
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`However, because the market had not been put on notice of the fact that
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`Facebook’s business had been materially impaired, in the week before the IPO, market demand
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`for Facebook shares reached levels that the financial press described as “astronomical.” In
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`response to this surge of demand, days before it went public, the Company and the underwriters
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`significantly increased the price and size of the IPO, boosting the price to $38 per share (from a
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`previously announced range of $28 to $35 per share), and increasing the size of the offering by
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`more than 80 million shares. All of the new shares made available to the public came from
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`selling insiders, including certain of the Company’s directors and one of its underwriters,
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`6
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`Goldman Sachs, who each decided to vastly increase the number of shares they were selling to
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`the public.
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`16. With the market unaware of Facebook’s pronounced revenue deterioration,
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`Facebook completed its IPO as scheduled after the close of the market on May 17. The IPO not
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`only generated billions of dollars for Facebook, but it made many of the Company’s senior
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`executives and directors exceptionally rich. Based on the IPO price, the stock held by
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`Facebook’s 28-year-old CEO, Defendant Mark Zuckerberg, was worth $19 billion, making him
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`one of the wealthiest men in the world.
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`17.
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`Facebook stock began publicly trading the next day, Friday, May 18. After
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`opening at $42.05 on a surge of retail demand, Facebook stock immediately began to plummet,
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`falling back to the IPO price of $38 per share, and ultimately closing at $38.23, a performance
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`that analysts and the financial press concluded was surprising and disappointing.
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`18.
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`Beginning on the night of May 18 and continuing over the next several days,
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`news of the decline in Facebook’s revenues began to emerge. On the night of May 18, Reuters
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`reported that, days before the IPO, Facebook had taken the “rare and disruptive” step of lowering
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`its guidance to analysts during the time period that its roadshow was occurring. This news swept
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`through the market and, over the weekend of May 19-20, members of the financial press reported
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`that this information was highly material and fundamentally affected the value of Facebook’s
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`stock. For example, on May 19, Business Insider reported that Facebook’s decision to reduce its
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`guidance “mid-way through a series of meetings designed for the sole purpose of selling the
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`stock” was “highly material information. [S]uch a late change in guidance would mean that
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`Facebook’s business was deteriorating rapidly – between the start of the roadshow and the
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`middle of the roadshow. Any time a business outlook deteriorates that rapidly, alarm bells start
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`7
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`going off on Wall Street, and stocks plunge.” As Business Insider further noted, investors who
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`were not informed of this critical new information have “every right to be furious. Because this
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`would have been highly material information that some investors had and others didn’t – the
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`exact sort of unfair asymmetry that securities laws are designed to prevent.”
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`19.
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`On the very next trading day, Monday, May 21, Facebook shares collapsed.
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`Facebook stock opened sharply down from the IPO price and plummeted throughout the day on
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`extremely high trading volume, closing down at $34.03, a decline of nearly 11% from the IPO
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`price.
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`20.
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`Prior to the opening of trading on May 22, Reuters again shocked the market by
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`reporting that, “while an investor roadshow was underway,” lead underwriters Morgan Stanley,
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`J.P. Morgan, and Goldman Sachs had taken the highly unusual step of “significantly” cutting
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`their revenue forecasts for Facebook, but appeared to have told only a few “major clients” about
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`this highly “negative” development. On Tuesday, May 22, Facebook shares again swiftly
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`plummeted. Facebook stock opened the day down sharply from the prior close, and ended the
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`trading session at $31 per share, a decrease of approximately 9%, again on extremely high
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`volume. Thus, in just two trading days over May 21 and 22 – only Facebook’s second and third
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`trading days as a public company – its shares had fallen more than 18% from the IPO price,
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`wiping out billions of dollars of Facebook’s market capitalization. As Bloomberg reported, the
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`collapse in Facebook’s stock on May 21 and 22 was “epic:” based on that two-day decline,
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`Facebook’s IPO became the single worst performing initial public offering in 10 years, making it
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`the “flop of the decade.”
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`21.
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`Following the collapse in Facebook’s stock price, numerous market commentators
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`pointedly wrote that the Registration Statement failed to disclose highly material information
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`8
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`regarding Facebook’s revenue declines, and that the belated disclosure of this information had
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`significantly altered the total mix of information in the market. For example, Business Insider
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`reported that, “This was selective disclosure of critical non-public information. Facebook’s
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`amended prospectus did not say that the company’s business had suddenly weakened and
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`management’s outlook had changed. And that information is vastly more important than what
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`the prospectus did say, which was that users are growing faster than revenue.”
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`22.
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`Similarly, Venture Beat, a widely read publication that covers technology and
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`finance, reported that Facebook’s amended Registration Statement did not put investors on notice
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`that there had been a material change in Facebook’s business in the weeks leading up to the IPO:
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`In that May 9 update [referring to the amended Registration Statement], Ebersman
`decided to use vague language when describing how the company’s second
`quarter was looking. It was extremely understated, considering what we would
`later find out. … [T]his update itself didn’t send any alarm bells to most
`investors, and it shouldn’t have. … [T]he reality is that this wording was just too
`vague to be construed by normal people as meaning anything more than what had
`already been mentioned before. … The fact is, there is nothing within the S-1
`update on May 9 that would give normal investors the sense that there had been a
`material change about Facebook’s revenue prospects.
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`23.
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`Based on the facts alleged herein, Lead Plaintiffs assert claims under: (i) Section
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`11 of the Securities Act against Facebook, certain of its senior executives, its directors, and the
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`underwriters of its $16 billion IPO; (ii) Section 12(a)(2) of the Securities Act against Facebook,
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`certain of its senior executives, and the underwriters of its IPO; and (iii) Section 15 of the
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`Securities Act against Facebook’s senior executives and directors.
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`II.
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`JURISDICTION AND VENUE
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`24.
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`The claims asserted herein arise under Sections 11, 12 and 15 of the Securities
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`Act, 15 U.S.C. §§ 77k, 77l, and 77o.
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`25.
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`This Court has jurisdiction over the subject matter of this action pursuant to
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`Section 22 of the Securities Act, 15 U.S.C. § 77v, and 28 U.S.C. § 1331, because this is a civil
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`action arising under the laws of the United States.
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`26.
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`Venue is proper in this District pursuant to Section 22(a) of the Securities Act, 15
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`U.S.C. § 77v, and 28 U.S.C. § 1391(b), (c) and (d). Many of the acts and transactions that
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`constitute violations of law complained of herein, including the dissemination to the public of
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`untrue statements of material facts, occurred in this District.
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`27.
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`In connection with the acts alleged herein, Defendants directly or indirectly used
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`the means and instrumentalities of interstate commerce, including, but not limited to, the United
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`States mails, interstate telephone communications, and the facilities of national securities
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`exchanges.
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`III.
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`PARTIES
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`A. Lead Plaintiffs
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`28.
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`Lead Plaintiff the North Carolina Department of the State Treasurer on behalf of
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`the North Carolina Retirement Systems (“North Carolina DST”) is an arm of the Government of
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`the State of North Carolina, which is entrusted by statute with managing the pooled funds held
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`on behalf of the North Carolina Retirement Systems. The North Carolina Retirement Systems
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`are statutory retirement and benefit plans that cover more than 850,000 public employees and
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`teachers. North Carolina DST purchased 685,373 shares of Facebook in the IPO. On December
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`6, 2012, this Court appointed North Carolina DST as a Lead Plaintiff for this litigation.
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`29.
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`Lead Plaintiff the Arkansas Teacher Retirement System (“Arkansas Teacher”) is a
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`state-wide retirement system that provides retirement benefits for the employees of Arkansas’
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`public schools and other educational institutions. As of June 30, 2011, Arkansas Teacher
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`managed more than $11.7 billion in assets for the benefit of its members. Arkansas Teacher
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`10
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`purchased 246,849 shares of Facebook in the IPO. On December 6, 2012, this Court appointed
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`Arkansas Teacher as a Lead Plaintiff for this litigation.
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`30.
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`Lead Plaintiff the Fresno County Employees’ Retirement Association (“Fresno”)
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`provides retirement benefits for the employees of the County of Fresno, Superior Courts of
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`California Fresno, and for other participating agencies. As of March 31, 2012, Fresno managed
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`over $3.2 billion in assets for the benefit of its members. Fresno purchased 95,900 shares of
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`Facebook in the IPO. On December 6, 2012, this Court appointed Fresno as a Lead Plaintiff for
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`this litigation.
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`31.
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`Lead Plaintiff Banyan Capital Master Fund Ltd. (“Banyan”) is an investment fund
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`that has been in operation since 2004. Banyan purchased 1,415,862 shares of Facebook common
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`stock traceable to the IPO. On December 6, 2012, this Court appointed Banyan as a Lead
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`Plaintiff for this litigation.
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`32.
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`Lead Plaintiffs purchased Facebook common stock in or traceable to the IPO as
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`detailed in the certifications already on file with the Court and attached hereto as Appendix A,
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`and suffered damages as a result of the violations of the federal securities laws alleged herein.
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`B. Named Plaintiffs
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`33.
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`Named Plaintiffs Jose G. Galvan and Mary Jane Lule Galvan, a married couple,
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`jointly purchased 21,100 shares of Facebook stock on May 18, 2012 that were traceable to the
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`IPO. Named Plaintiffs’ purchases of Facebook common stock traceable to the IPO are detailed
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`in the certification already on file with the Court and attached hereto within Appendix A.
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`Named Plaintiffs suffered damages as a result of the violations of the federal securities laws
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`alleged herein.
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`Case 1:12-cv-04081-RWS Document 98 Filed 02/28/13 Page 15 of 95
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`C. Defendants
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`1. Corporate Defendant
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`34.
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`Defendant Facebook is a Delaware corporation headquartered at 1601 Willow
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`Road, Menlo Park, California 94025. The Company operates the world’s largest social
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`networking service through its website at www.facebook.com, which is accessed by more than
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`900 million active users per month. Facebook provides a platform for its users to, among other
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`things, create their own profiles, connect with other individuals they identify as “friends,” share
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`communications, post photographs, and play games with one another. On or about May 17,
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`2012, Facebook conducted its IPO, in which it issued 421,233,615 shares of its Class A common
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`stock to the public, with an underwriter option to issue an additional 63,185,042 shares of Class
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`A common stock, generating total proceeds of more than $16 billion. The IPO was conducted
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`pursuant to several documents that were filed with the SEC and disseminated to the investing
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`public, including: (i) Facebook’s Registration Statement dated February 1, 2012 and filed with
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`the SEC on Form S-1, as amended by eight subsequent amendments, which contained versions
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`of the prospectus (the “Registration Statement”); and (ii) the final prospectus, which was filed
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`with the SEC on May 18, 2012 on Form 424(b)(4) (the “Prospectus”). Facebook securities
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`actively trade on the NASDAQ under the ticker symbol FB and, as of January 29, 2013, there
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`were 1,684,185,170 shares of its Class A common stock outstanding.
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`2. The Individual Defendants
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`35.
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`Defendant Mark Zuckerberg is the founder, Chairman and Chief Executive
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`Officer of Facebook. Zuckerberg signed the Registration Statement filed with the SEC on
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`February 1, 2012 and all subsequent amendments. He also made numerous statements
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`concerning Facebook’s business in Facebook’s roadshow video and at Facebook’s roadshow
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`meetings with investors, through which the Company marketed its IPO to investors. Zuckerberg
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`Case 1:12-cv-04081-RWS Document 98 Filed 02/28/13 Page 16 of 95
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`sold 30.2 million shares of Facebook Class A common stock in the IPO for proceeds of
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`approximately $1.15 billion. Following the IPO, Zuckerberg retained control of approximately
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`56% of the voting power of Facebook’s capital stock, rendering Facebook a “controlled
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`company” under the corporate governance rules for NASDAQ-listed companies. Because of his
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`senior position within and control of the Company, Zuckerberg possessed the power and
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`authority to control the contents of the Registration Statement and Prospectus, Facebook’s press
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`releases, investor and media presentations, and other SEC filings.
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`36.
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`Defendant Sheryl K. Sandberg is Facebook’s Chief Operating Officer (“COO”),
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`the Company’s most senior officer behind Defendant Zuckerberg. Sandberg made numerous
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`statements concerning Facebook’s business in Facebook’s roadshow video and at Facebook’s
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`roadshow meetings with investors. Because of her senior position within and control of the
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`Company, Sandberg possessed the power and authority to control the contents of the Registration
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`Statement and Prospectus, Facebook’s press releases, investor and media presentations, and other
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`SEC filings.
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`37.
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`Defendant David Ebersman is Facebook’s Chief Financial Officer (“CFO”).
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`Ebersman signed the Registration Statement filed with the SEC on February 1, 2012 and all
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`subsequent amendments. Ebersman also made numerous statements concerning Facebook’s
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`business in Facebook’s roadshow video and at Facebook’s roadshow meetings with