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Facebook and its managing director Mark Zuckerberg have been sued in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that has wiped out about $ 120 billion of shareholder wealth.
The complaint filed by the James shareholder The Federal Court of Kacouris in Manhattan has accused Facebook, Zuckerberg and the financial director David Wehner of making misleading statements or not disclosing the slowdown in revenue growth, the lower operating margins and lower active users. Kacouris said the market was "shocked" when "the truth" began to emerge on Wednesday from California-based Menlo Park. He said the 19 percent plunge in Facebook's stock the next day came from federal securities law violations by the defendants.
The prosecution seeks clbad action status and unspecified damages. A Facebook spokesperson declined to comment
Shareholders often sue companies in the United States after unexpected stock price declines, especially if the loss of wealth is significant.
Facebook has faced dozens of lawsuits for manipulating user data in a scandal involving British company Cambridge Analytica. Many were consolidated in the federal court in San Francisco. Zuckerberg was tied with Warren Buffett as the fourth richest person in the world, but the current $ 83 billion fortune of Berkshire Hathaway's president topped Zuckerberg's $ 66 billion, Forbes said.
Third in the World Billionaires while Zuckerberg is sixth
Facebook shares still fall 0.8% Friday, closing at $ 174.89 on the Nasdaq.
Investors Want Zuckerberg's Handle Released
There was always an absolute leader, cemented by a stock clbad structure that maintained control of Mark Zuckerberg's voices even when he was selling millions of shares. Some investors grumbled, but most were happy to remain silent while the stock jumped. This week's dive reversed this dynamic, increasing calls for changes at the top.
"This is never a problem until things go wrong," said Brian Wieser, an badyst at Pivotal Research Group. He thinks that a change in Facebook's leadership is inevitable, and said the latest figures could hasten that. "It's really hard to imagine maintaining the status quo." A spokeswoman for Facebook declined to comment.
Thursday, Facebook dropped by 20%, which cost investors $ 120 billion – the biggest single-day loss in history. Shareholders who had survived months of renewed debate about Facebook's role in the company and the ethics of its business model suddenly turned their backs when they realized that growth had run out. Facebook's main application. Chief Financial Officer David Wehner said growth rates would drop from "high single-digit percentages".
The loss of faith encouraged voices that asked Zuckerberg to share more of his voting rights and to give up "Zuckerberg only responds to Zuckerberg," said Jonas Kron, Director of Shareholder Defense from Trillium Asset Management, which last year supported a shareholder proposal to replace Zuckerberg as chairman of the board of directors. . Since Thursday 's sale, he has received new phone calls and e – mails from other investors expressing his support. He refused to identify these people.
For over a year, Facebook and other social media companies are under fire from policymakers and regulators for letting false news, Russian trolls and manipulators proliferate over their services. Now that they are cracking down, it's spoiling growth, frightening investors. Authentic accounts and real information can be good for longer term business. But Kron said that Facebook could have avoided some problems if Zuckerberg's power was controlled by an independent president.
Other major technology companies such as Microsoft, Apple and Alphabet have split the roles of CEO and President. Twitter suffered its own stock market crash this week, down 21% on Friday after stagnant user growth. He's about the same age as Facebook and has a similar mindset to the founders, but he already has a separate executive chairman
Zuckerberg holds too much power, said John Streur, managing director of Calvert Research and Management. Earlier this year, he worried about Facebook's approach to privacy and customer data. In April, when he realized that engaging with the company would not change much, his fund sold his Facebook shares.
"Facebook's governance structure remains below industry standards, with great authority over the founder and CEO," Streur said. "Shareholder rights are not well respected, limited controls are in place on executive compensation and concerns have been raised about the effectiveness of risk monitoring, including the risk of confidentiality and security . "
their dissatisfaction. In 2012, the California State Teachers' Retirement System asked Facebook to separate the roles of CEO and President and to dispense with the stock structure that gave Zuckerberg such a hold. In April, Chris Ailman, chief investment officer of the pension fund, said the Facebook data privacy crisis was fueled by Zuckerberg's almost total control. Calstrs owned more than 4 million Facebook shares at the end of March, according to data compiled by Bloomberg.
When Zuckerberg attempted to sell his shares while retaining control, some investors sued. Last September, just before the lawsuit, Facebook retreated.
In a Facebook post, Zuckerberg said he no longer needed the new stock structure because the company's stock had grown so much that he was able to fund his philanthropy without selling too much of his interest. This week's dive will force the CEO to unload more of his shares to keep the same level of donations.
Zuckerberg's own words show how much the company could benefit from an independent director on his advice, Kron said. In blog posts and during his congressional appearance in April to explain how a Trump campaign-related company accessed millions of information, Zuckerberg said Facebook had not taken enough hindsight on his responsibility
. The chairman of the board of directors, "said Kron, said the violent reaction to Facebook's old policy of allowing developers of third-party applications to exploit data from users could have been avoided if someone had a broader and more questioning perspective.
Trillium proposed to separate the CEO and the roles chairman a few days before Wednesday's disappointing results. the votes of 51 percent of the uninitiated investors, according to the investment firm.Kron expects this number to increase this time.
"It's hard to escape the conclusion that there are systemic problems in the way Facebook has been managed," writes Wieser de Pivotal in a note before the results. Even if Mr. Zuckerberg retains his right to vote, having more independent members would at least give shareholders more votes, the badyst said.
How should Facebook write the job description of a potential independent president? "Someone with gravitas, someone with vision, business and technology chops," Kron said. They would also need a "good understanding of social impacts. The ability to think about unintended consequences, "he said.
One suggestion: Bill Gates. The founder of Microsoft has experienced similar rapid growth, followed by a period of instability marked by a deadly antitrust battle. After a lost decade, the company has emerged stronger, with new leaders and new strategies.
"When Microsoft took the opposite, they had an independent chair," Kron said. "Bill Gates gave up
his presidency."
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