FACEBOOK AND A NUMBER of banks will now face a lawsuit accusing the company of misleading investors about its financial health before its initial public offering (IPO) back in May 2012.

US  District judge Robert Sweet said that investors could pursue claims that Facebook should have disclosed internal projections on how increased mobile usage and product decisions could reduce future revenue, Reuters reports.

The lawsuit, filed in June 2012, claims Facebook “selectively” disclosed parts of its revenue outlook to some investors and not all. Those estimates were lower due to expectations of increased mobile use, something that the company had trouble generating revenue from at the time.

The claimants are seeking damages resulting from them having sold or holding onto the shares as they fell below the IPO price, bottoming at $17 (€12) during September 2012. Since then, it has grown steadily and is now worth $55.57 (€40) today.

More than 40 defendants were sued, including Facebook COO Sheryl Sandberg, lead underwriter Morgan Stanley, Goldman Sachs and JPMorgan Chase and Co.

In court papers, the defendants had argued that Facebook had no obligation to make the requested disclosures, and that the company’s actual results exceeded original projections.

In its latest earnings report in October, Facebook generated €1.48 billion in revenue during the third quarter of 2013. Most of its growth came from ad revenue on mobile which made up approximately 49 per cent of its overall ad revenue.

The site had 1.19 billion monthly active users and 728 million daily active users as of September 2013.

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