And meanwhile CNBC reports that Facebook insiders “sold more stock than usual in the second quarter,” the vast majority sold by Mark Zuckerberg, leaving some experts with mixed opinions. To be clear, insiders sold in compliance with what’s known as Securities and Exchange Commission Rule 10b5-1, a preapproved selling mechanism that is completely legal. And there is no evidence to suggest they were acting on inside information about the disastrous quarter that sent Facebook’s stock down nearly 20 percent Thursday. However, their timing happened to be pretty good….
“You have something that’s an outlier here,” said James Cox, professor at Duke University School of Law. “It happened to be a very bad quarter that they had — it doesn’t wear well.”
Friday Facebook and Mark Zuckerberg were sued “in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about $120 billion of shareholder wealth.” The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, 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.
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 percent 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 spokeswoman declined to comment.