Facebook investors including KBC Asset Management (KBCAM) have been given permission by a US judge to pursue their class action against the social media company, relating to growth forecasts published in the run-up to its initial public offering (IPO) on the NASDAQ in May 2012.

The plaintiffs, who represent a class of purchasers of Facebook Class A common stock in the IPO, claim Facebook made materially untrue and misleading statements in its registration statement and prospectus.

Facebook’s primary revenue source is advertising, and the registration statement referred to growth opportunities in the mobile market, as well as the risks involved in monetising that market by displaying advertisements on mobile devices, which Facebook had not yet done.

But after the statement was published, and only a day after the first roadshow presentation, Facebook cut its internal projected revenue figures for the second quarter of 2012, as potential negative implications of increased mobile use became clearer.

Only a small number of analysts were told about this change.

Ten days later, the hugely successful IPO saw 421m Facebook shares sold at $38 each, raising a total of more than $16bn (€14.8bn) and making it one of the largest-ever IPOs for a technology company.

Soon afterwards, however, news of Facebook’s falling revenues began to emerge.

Reuters reported that, shortly before the IPO, Facebook had taken the “rare and disruptive” step of cutting its revenue guidance to analysts during the period when the roadshow was taking place.

It also later revealed that, as a result, analysts from three of the lead IPO underwriters – Morgan Stanley, Goldman Sachs and JPMorgan Chase – revised their revenue estimates for Facebook while the roadshow was in progress but disclosed this fact only to a small number of select clients.

Following these assertions, Facebook’s stock price fell more than 18% below the IPO price, wiping out billions of dollars in market capitalisation.

The share price took more than a year to recover.

Robert Sweet, US district judge, Southern District of New York, has now allowed class certification for both institutional and retail investors, allowing them to pursue group lawsuits, and appointed class representatives and counsel.

The defendants had argued that shareholders should pursue their claims individually because of the varying degrees of their knowledge about mobile’s negative impact on Facebook’s revenue, as well as about the revised revenue projections.

But Judge Sweet said: “As long as a sufficient constellation of common issues binds class members together, variations in the sources and applications of a defence will not automatically foreclose class certification.”

The defendants had also argued that the class could not be certified because “US securities laws do not apply extraterritorially … but only where title to the security transfers within the US”.

More than 53m shares had been sold through the IPO to investors based abroad.

But the judge accepted the plaintiffs’ assertion that foreign allocants “participated in a strictly US IPO of a US company in order to receive shares registered in the US with the SEC that would trade exclusively on an American exchange”.

KBCAM’s participation as a plaintiff is through two sub-funds of the KBC Equity Fund, KBC Equity Fund New Shares and KBC Equity Fund Technology.

Because of their specific investment proposition – technology shares and IPOs, respectively – both funds invested in a limited number of Facebook shares when the company was floated.

The shares account for barely 1% of the funds’ portfolios, and KBCAM said their impact on the funds’ performance and net asset value is negligible.

But it said it joined this action because its duty as an asset manager is to defend the interests of its customers and investors, regardless of their size.

The lead plaintiffs are the North Carolina Department of State Treasurer (on behalf of the North Carolina Retirement Systems), the Arkansas Teacher Retirement System and the Fresno County Employees’ Retirement Association.

The defendants include Facebook, a number of Facebook directors and officers including chairman and co-founder Mark Zuckerberg, and the underwriters of the IPO.

Facebook has said it is appealing the decision.

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