Greg's Corner

Facebook sued by shareholders over after stock plunge

As if losing $150 billion in last week’s stock drop wasn’t enough, Facebook is now facing another threat to its bottom line. A number of class action lawsuits have been filed against the social media industry leader by major shareholders of the company. The lawsuits allege that Facebook misled shareholders in the time leading up to last week’s biggest ever stock drop in US history.

Three lawsuits have been filed in New York while one has been filed in California. These suits allege that Facebook understated the cost of complying with the EU’s GDPR privacy laws, and the lack of disclosure over the monetization of Instagram Stories which the lawsuits claim Facebook allegedly overstated its success.

It also doesn’t help Facebook that many of its top executives sold off large amounts of their stock during the second quarter of the year, the same quarter where Facebook earnings fell causing the historical stock drop. Some of those executives include Mark Zuckerberg himself and COO Sheryl Sandberg. While these sales were not considered to be insider trading, the timing of the stock sale couldn’t be more inconvenient for Facebook.

Whether or not these lawsuits will have any major financial impact on Facebook remains to be seen. After the stock dropped last week, many financial analysts were urging new investors to jump on the stock after the drastic price decrease. Before we know it, it could be business as usual again at Facebook in little to no time.