MARK Zuckerberg and leading Facebook investors cashed out millions of shares before the price dropped off a cliff, according to company filings.
It was also revealed a company executive issued a warning days before the initial public offering that Facebook's revenues were lower than expected, information that would have almost certainly reduced the opening price of the newly floated stock.
The new reports are already raising questions about whether top investors profited from the IPO at the expense of smaller buyers.
Shareholders filed a lawsuit against Facebook and the banks behind the company's stock, Morgan Stanley and Goldman Sachs, yesterday.
Both the US Securities and Exchange Commission and the Financial Industry Regulatory Authority are looking into the matter.
The US Senate Banking Committee has also launched an inquiry and the state of Massachusetts has subpoenaed Morgan Stanley. Facebook stock rose 3.3 per cent yesterday, to $32 a share. But a new analysis said the stock could fall as low as $9.59.
That would be a far cry from the $37.58 Zuckerberg fetched for the 30.2 million shares he unloaded on Friday.
The founder of the social networking website made $1.13 billion on the sale.
By Wednesday the price had dropped to $31 - meaning that Zuckerberg had saved himself $174 million.
The 28-year-old still holds a vast amount of Facebook stock but his decision to sell off so much will leave investors wondering about his confidence in the company.
The drop is based around the realisation Facebook might not be growing as quickly as initially thought.
And second-quarter growth will likely fall short of expectations as fewer new users join the social networking giant.
Shareholders filed a lawsuit yesterday, alleging Zuckerberg, Facebook and the banks that backed the IPO, Morgan Stanley and Goldman Sachs, knew this information.
On Wednesday it was revealed the banks' analysts downgraded their estimates of future earnings while they were rolling out the IPO.
Business Insider reported the banks revealed to privileged major investors the share price was likely to tank, but left smaller stock buyers in the dark.
Read more: http://www.news.com.au/business/comp...#ixzz1voFfsKDl
funny thats called a pump and dump and against the SCC laws , so why aint he being arrested ???