Facebook investors are alleging in a recently filed class-action lawsuit that CEO Mark Zuckerberg had inside information that the company's stock was overvalued and dumped shares ahead of their post-IPO plummet.
According to TMZ, the suit alleges that Zuckerberg knew Facebook shares had been valued too high ahead of the company's historic IPO and sold off a large chunk as the price dropped following their debut.
In particular, the suit alleges that Zuckerberg hid from most investors the fact that the Facebook business model was not built to sustain enough advertising revenue to support an IPO price of $38 a share.
The suit claims that underwriters Morgan Stanley, J.P. Morgan Chase, and Goldman Sachs all warned Zuckerberg before the IPO that the company was overvalued, but that the information was "selectively disclosed" to only the social network's largest investors.
Facebook shares have fallen nearly 30 percent since their May 18 debut. In recent trading, Facebook stock was down 2.8 percent at $26.96.
WTTG FOX 5 & myfoxdc
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