I had only read the first page, which is very general. The rest of it is quite interesting and I'm going to look at some other sources. There seem to be three basic areas:
1) the NASDAQ glitch on opening day. The article does not relate this to any supposed new information that was being circulated, nor does any other source I looked at.
2) The reporting of current mobile vs. landline trends. This seems to be at the heart of the author's charges. If Facebook falsified their financials, then they are guilty of fraud. But no one seems to be coming out and actually claiming that, at least not in so many words. Here's what Facebook said in its initial prospectus:
5....As an example, we believe that the recent trend of our [daily average users] increasing more rapidly than the increase in the number of ads delivered has been due in part to certain pages having fewer ads per page as a result of these kinds of product decisions These decisions may not produce the long-term benefits that we expect, in which case our user growth and engagement, our relationships with developers and advertisers, and our business and results of operations could be harmed.
In the infamous May 9 disclosure, which was sent to all prospective buyers, "five new sentences were added to the prospectus as a result (including the sentence in point 5 above relating to the number of ads delivered)."
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(Source: http://blogs.wsj.com/deals/2012/05/24/dealpolitik-suing-facebook-best-of-luck/)[/font]
Unless current revenue or traffic statistics were falsified, it's clear clear where the fraud is.
3) That leaves the internal selling. The company did not have the traditional holding period for employees and insiders. Perhaps it should be a requirement, but it's not. It's not surprising that a lot of employees who had been working for stock instead of salary wanted to cash in, get out of debt, and secure their retirement.
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It does look like Facebook fought their underwriters to maximize the IPO price. Insiders cashed in and retail investors lined up and said "take my money." The investment banks and institutional buyers took the major hit -- perhaps that is why the issue has some traction.
Something might be unearthed in the shareholder suits. But at this point I have to agree with the article linked above:
But what about those research analysts changing their estimates? It probably could not have worked any other way under our current regulatory scheme. Analysts who work for underwriters are prohibited from publishing their research prior to an IPO. They are permitted to talk to their clients and give their views. They are required to be independent from the investment bankers who run the IPO. If the May 9 disclosures caused them to think a change in their estimates was appropriate (and how could they not when a new “recent trend” was disclosed?), their independence requirement presumably forced them to make such changes. But the law still prohibited them from publishing any of their research.
Is there an unfairness in our regulatory system in which institutions have access to research analysts in an IPO and retail investors do not? There may well be. But that does not mean there was a violation of the law.
It is possible some deep dark conspiracy among Facebook and its underwriters could eventually surface. But there is no evidence of that yet.
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