Securities Class Action Centers on How Whistleblower Revelations Allegedly Harmed Facebook Share Prices

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Facebook, CEO Mark Zuckerberg and CFO David Wehner face a proposed class action over a number of stock-price drops allegedly linked to recent whistleblower revelations across a series of Wall Street Journal and CBS News articles and television news reports. 

The 28-page securities complaint focuses specifically on a drop in Facebook share price that occurred after a September 13, 2021 WSJ article revealed that the social media platform and Zuckerberg, despite their public position to the contrary, had different rules in place for those considered to be “high-profile” users, such as celebrities and politicians. The suit also centers on a stock price drop that occurred after the release of a September 28 WSJ piece on Facebook’s attempts to pull in child and “tween” users as part of its long-term business strategy to compete with the likes of Snapchat and TikTok. 

Similarly highlighted in the case is a stock price drop that occurred after the airing of an October 3 CBS News 60 Minutes segment wherein whistleblower Frances Haugen described in detail the ways Facebook has prioritized profits over creating a platform less filled with “angry and divisive and polarizing” content. The last stock-price-dropping event cited in the complaint is the publication of an October 4 CBS News article that detailed Haugen’s allegations in an SEC complaint that Facebook knew its platform was used “to promote human trafficking and domestic servitude,” as well as perpetuate misinformation, but did little to stop it. 

After the release of the September 13 WSJ article, Facebook shares fell by $5.17, and the release of the September 28 report saw Facebook shares drop by $7.32, the lawsuit says. Following the airing of the October 3 60 Minutes interview and the subsequent publication of the CBS News whistleblower report on the SEC complaint, Facebook’s share price fell by $16.78 per share, the case states. 

“From the first WSJ article published on September 13, 2021, to the final disclosure on October 4, 2021, Facebook share prices fell by $55.45, or over 14%, damaging investors,” the lawsuit alleges. 

The lawsuit alleges Facebook, dating back to November 2016, has misled investors with regard to overall user growth, its apparent knowledge of how many duplicate accounts were responsible for its growth, its failure to have a fair platform for speech, its protecting of “high-profile” users, and its alleged failure to “respond meaningfully to drug cartels, human traffickers, and violent organizations,” as well as its work to attract preteens to its platform and services. 

The lawsuit looks to represent all persons and entities who purchased publicly traded Facebook securities between November 3, 2016 and October 4, 2021. 

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