The lawsuit has also been filed against CEO Mark Zuckerberg and several banks for allegedly hiding critical information ahead of Facebook’s IPO.
According to Reuters the lawsuit was filed in the U.S. District Court in Manhattan and accuses the defendants of withholding important information before Facebook’s IPO.
The information said to be withheld was "a severe and pronounced reduction" in forecasts for Facebook’s revenue growth.
The concealed information about Facebook’s value being significantly less than projected is a reminder of what many analysts had previously said about Facebook’s high share price, deeming it presumptuous and overpriced.
The plaintiffs assert that the forecast information was only told to a select group of preferred investors and not the entire community.
Morgan Stanley is one of the banks accused of withholding revenue growth information.
"Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs," Morgan Stanley spokesman Pen Pendleton said in a statement. "These procedures are in compliance with all applicable regulations."
The issue of withholding selective information has attracted the attention of the Securities and Exchange Commission (SEC) who announced they would be looking into issues surrounding the IPO.
"I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook," said Securities and Exchange Commission Chairman, Mary Schapiro.
On Friday, Facebook’s stock opened at $38, even reaching $45 at one point, but has been own a downward spiral since closing at $31 last night. Since going public Facebook stock has fallen by 18%.
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