On September 13, 2021, during trading hours, The Wall Street Journal (“WSJ”) published an article titled “Facebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt.” It would be the first of nine articles published by the WSJ based on documents provided by a then-unknown whistleblower (the “Whistleblower”). On this news, Facebook, Inc. (“Facebook” or the “Company”) shares dropped by $5.17 to close at $376.51 on September 13, 2021.
On September 28, 2021, during market hours, the WSJ published an article titled, “Facebook’s Effort to Attract Preteens Goes Beyond Instagram Kids, Documents Show.” On this news, Facebook share prices dropped $7.32 to close at $340.65 on September 28, 2021.
On October 3, 2021, CBS News aired a television segment on 60 Minutes interviewing the Whistleblower, revealed to be Frances Haugen, on her findings during her time at Facebook. On October 4, 2021, CBS News published an article titled, “Whistleblower’s SEC Complaint: Facebook Knew Platform Was Used to ‘Promote Human Trafficking and Domestic Servitude,'” which contained the whistleblower complaints against Facebook filed with the SEC. There were eight complaints shared in the CBS article. As a result of the October 3 and 4 revelations, Facebook’s share price dropped $16.78 per share, or approximately 4.9%, from closing at $343.01 on October 1, 2021, the prior trading day, to close at $326.23 on October 4, 2021.
A securities class action has been filed against Facebook on behalf of shareholders that purchased Facebook shares between November 3, 2016 through October 4, 2021. This case has been filed in the U.S. District Court for the Eastern District of New York.
The Complaint alleges that the defendants made materially false and/or misleading statements because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operational and financial results, which were known to defendants or recklessly disregarded by them. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) Facebook misrepresented its user growth; (2) Facebook knew, or should have known, that duplicate accounts represented a greater portion of its growth than stated, and it should have provided more detailed disclosures as to the implication of duplicate accounts to Facebook’s user base and growth; (3) Facebook did not provide a fair platform for speech, and regularly protected high profile users via its Cross Check/XCheck system; (4) despite being aware of their use of Facebook’s platforms, the Company failed to respond meaningfully to drug cartels, human traffickers, and violent organizations; (5) Facebook has been working to attract preteens to its platform and services; and (6) as a result, Defendants’ public statements were materially false and misleading at all relevant times.
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