Facebook, along with its chief executive Mark Zuckerberg and several banks, have to face a lawsuit accusing the social networking firm of deceiving investors with alleged pre-IPO 'material misrepresentations', a federal judge revealed.
The US District Judge Robert Sweet said that shareholders can trail claims that Facebook may have revealed internal projections on how the rise in mobile usage and decisions made on products would trim down future revenue prior to its May 2012 IPO.
Reuters cited 83-page decision by Sweet as saying that the company's alleged risk warnings misleadingly represented that this revenue cut was merely possible when, in fact, it had already materialised.
"Plaintiffs have sufficiently pleaded material misrepresentations that could have and did mislead investors regarding the company's future and current revenues," Sweet said.
Shareholders also alleged that the social networking firm had carelessly masked material information from its IPO registration statement that it had offered to its underwriters' analysts.
Facebook said in a statement: "We continue to believe this suit lacks merit and look forward to a full airing of the facts."