Bloomberg News

Facebook Says SEC Dropped Inquiry Into IPO-Related Flaws

July 25, 2014

Facebook Inc. (FB:US) said the U.S. Securities and Exchange Commission won’t take action against it for the controversy around its 2012 initial public offering.

“The events surrounding our IPO became the subject of various state and federal government inquiries,” Facebook said in a regulatory filing (FB:US) yesterday. “In May 2014, the Securities and Exchange Commission notified us that it had terminated its inquiry and that no enforcement action had been recommended by the SEC.”

The social network’s May 2012 IPO ran into multiple snafus when the stock dropped after going public and was also tarnished by a software malfunction that delayed trading. In the aftermath, retail customers damaged by the sudden fall in Facebook’s $38 share price filed civil lawsuits against the Menlo Park, California-based company.

The events led the SEC to probe Facebook’s IPO. The regulator’s initial focus was whether any material information was omitted from Facebook’s prospectus by the company, whether it shared bad news only with a select group, and whether sales people misrepresented demand for the social network stock to lure small investors.

Facebook’s stock, which lost half its value in the months following the IPO, has since recovered. Shares reached new highs this week after the company reported that second-quarter revenue rose 61 percent and profit more than doubled.

The stock (FB:US) rose less than 1 percent to $75.19 at the close in New York.

Vanessa Chan, a spokeswoman at Facebook, said she had no comment beyond the filing.

Facebook also said in the filing that it may extend the date for the close of its $19 billion acquisition of messaging startup WhatsApp Inc. Facebook had agreed to pay a termination fee of $1 billion cash and $1 billion stock if the deal didn’t close by August 19. The company said if certain conditions are satisfied, the closing period can extend to next year.

“We currently expect these conditions will be satisfied and that we will extend the date to August 19, 2015,” the company said.

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net James Callan


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Companies Mentioned

  • FB
    (Facebook Inc)
    • $77.19 USD
    • 0.76
    • 0.98%
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