http://fool.comFacebook might have a lot more trouble ahead than just a lackluster IPO. About the same time of the IPO, class action lawsuit "In Re: Facebook, Inc. Internet Tracking Litigation" was filed. Here you can read the 46-page document.
In essence, the plaintiffs contend that without their knowledge or permission, Facebook tracked via cookies their web browsing after they had logged off the site. Then Facebook made that information available to advertisers. They request $15 billion in damages, along with injunctive relief from the alleged activity.
This litigation could bring down the stock to near worthless. Also other public companies like LinkedIn and Google which provide social networking features could take a hit to not only the stock price but also reputational capital. Those other companies have also been in the soup for privacy violations.
Yes, it could be through the courts, both in the U.S. and abroad, that the high value of social media stocks could prove to be a bubble and that bubble could burst. Facebook founder Mark Zuckerberg might be shrewd to unload his stock as soon as it's legally okay. Hopefully that will be before the content of "In Re: Facebook, Inc. Internet Tracking Litigation" becomes mainstream business news and fodder for a special Letterman skit. Regarding the latter, evil looking characters could be apprehended throughout Manhattan tracking cookies.
Reflection: Remember when the legal sector bubble burst in 2007? Nothing has been the same since. If the social networking bubble bursts, investors could return to paying attention to boring companies like General Mills.
Here is my analysis of the lawsuit for the financial information company Motley Fool.