Facebook and Mark Zuckerberg sued after stock crash

Facebook's founder and CEO Mark Zuckerberg speaking at the Viva Tech start-up and technology summit in Paris, France, on May 24, 2018. PHOTO: REUTERS

NEW YORK • Facebook Inc and its chief executive 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 wiped out about US$120 billion (S$163.4 billion) of shareholder wealth.

The complaint filed by shareholder James Kacouris in Manhattan federal court on Friday accused Facebook, Mr Zuckerberg and chief financial officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins and declines in active users.

Mr Kacouris said the marketplace was "shocked" when "the truth" began to emerge on Wednesday from the Menlo Park, California-based company.

He said the 19 per cent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants.

The lawsuit seeks class-action status and unspecified damages.

A Facebook spokesman declined to comment.

Facebook has faced dozens of lawsuits over its handling of user data in a scandal also concerning the UK firm Cambridge Analytica. Many have been consolidated in the federal court in San Francisco.

Meanwhile, Twitter shares took a pounding on Friday amid a warning of a shrinking user base, extending a stock market bloodbath for what had been a sizzling social media sector.

Shares of Twitter tumbled 18.7 per cent to US$34.93 in midday trade despite a record profit of US$100 million in the second quarter, as financial markets focused on the new realities for social media firms moving to curb abusive behaviour and boost privacy.

The San Francisco-based firm said its base of monthly active users fell by one million from the past quarter to 335 million in the period, amid a purge of fake and abusive accounts and a crackdown on "bots" that manipulate the platform.

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A version of this article appeared in the print edition of The Sunday Times on July 29, 2018, with the headline Facebook and Mark Zuckerberg sued after stock crash. Subscribe