Facebook sued after its stock plunges

Days after Facebook’s stock suffered the largest drop in Wall Street history, a shareholder sued the company accusing the social media network of making misleading statements about its user numbers and operations.

The plaintiff, James Kacouris, filed the lawsuit Friday seeking class action status and to recover damages. Kacouris alleged that Facebook and its chief executive Mark Zuckerberg violated U.S. federal securities laws by misleading shareholders about the company’s number of active users and the slowing growth of the social network’s revenue.

Kacouris also named Facebook chief financial officer David Wehner in the lawsuit, filed in U.S. District Court for the Southern District of New York.

Facebook said in its earnings report that it anticipated slower revenue growth and slimmer margins in the future, in part to improve the safety of the platform. That forecast ignited a sell off that dragged the company’s market value down by more than US$100 billion. That was the largest single-day drop in Wall Street history.

“Facebook’s announcements shocked the marketplace,” Kacouris said in the complaint. He alleges that Facebook’s “wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common shares,” have resulted in significant losses and damages for him and other shareholders.

Facebook did not immediately respond to a request for comment.

Zuckerberg reiterated in the earnings call last week that the company’s major investments in security will lower its profitability. “We’re starting to see that this quarter,” he said, adding that “we run this company for the long term, not for the next quarter.”

Facebook faces another lawsuit filed earlier this year. Investors sued Facebook accusing the company of misleading shareholders over a data privacy scandal involving political consultancy Cambridge Analytica, which improperly accessed information from 87 million people.