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Exhibit 4
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------X
IN RE FACEBOOK, INC., IPO SECURITIES AND MDL No. 12-2389
DERIVATIVE LITIGATION,
OPINION & ORDER
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31
A P P E A R A N C E S: USDC SDNY
I
DO
. | E TRONI / FILED
Attorneys for Lead Plaintiffs
DOC #: h
LABATON SUCHAROW LLP DATE FILED: -
----
140 Broadway
New York, NY 10005
By: Thomas A. Dubbs, Esq.
James W. Johnson, Esq.
Thomas G. Hoffman, Jr., Esq.
BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP
1251 Avenue of the 44th Floor
Americas,
New York, NY 10019
By: Max W. Berger, Esq.
Salvatore J. Graziano, Esq.
John Rizio-Hamilton, Esq.
Jonathan Uslaner, Esq.
Jai Chandrasekhar, Esq.
Attorneys for Additional Named Plaintiffs and
Class Representatives Mr. & Mrs. Galvan
LIEFF CABRASER HEIMANN & BERNSTEIN LLP
250 Hudson 8th F1OOr
Street,
New York, NY 10013
By: Steven E. Fineman, Esq.
Nicholas Diamand, Esq.
Attorneys for Additional Named Plaintiffs and
Class Representatives Rand and Mr. & Mrs. Melton
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HACH ROSE SCHIRRIPA & CHEVERIE LLP
185 Madison Avenue
New York, NY 10016
By: Frank R. Schirripa, Esq.
Attorneys for Defendant Facebook and Individual
Facebook Defendants
KIRKLAND & ELLIS LLP
655 Fifteenth St. NW
Washington, DC 20005
By: Susan E. Engel, Esq.
Beth A. Williams, Esq.
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, NY 10022
By: Andrew B. Clubok, Esq.
Brant W. Bishop, Esq.
Nathaniel Kritzer, Esq.
KIRKLAND & ELLIS LLP
555 California Street, #2700
San Francisco, CA 94104
By: Elizabeth L. Deeley, Esq.
WILLKIE FARR & GALLAGHER LLP
1875 K Street, NW
Washington, DC 20006
By: Richard D. Bernstein, Esq.
Elizabeth J. Bower, Esq.
Matthew Edwards, Esq.
WILKIE FARR & GALLAGHER LLP
787 Seventh Avenue
New York, NY 10019-6099
By: Todd G. Cosenza, Esq.
Attorneys for Underwriter Defendants
DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, NY 10017
By: James P. Rouhandeh, Esq.
Charles S. Duggan, Esq.
Andrew Ditchfield, Esq.
2
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Attorneys for Defendant James W. Breyer
WILSON SONSINI GOODRICH & ROSATI
650 Page Mill Road
Palo Alto, CA 94304
By: Nina F. Locker, Esq.
Doru Gavril, Esq.
Liles H. Repp, Esq.
3
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Sweet, D.J.
Lead Plaintiffs Arkansas Teacher Retirement System and
Fresno County Employees' Retirement Association, Named
Plaintiffs and Class Representati v es Jose G. Galvan and Mary
Jane Lule Galvan, and Class Representatives Eric Rand, Paul
Melton, Lynn Melton, and Sharon Morley (together, "Plaintiffs")
have moved under Rule 23(e) for final approval of the Proposed
Settlement 1 and approval of a plan for its allocation (the "Plan
of Al l ocation " ). Court -appointed lead c lass counsel , Bernstein
Litowitz Berger & Grossman LLP and Labaton Sucharow LLP ("Lead
Counsel " ) have moved for a Lead Counsel Award of Attorneys'
fees, for payment of litigation expenses, and for payment of
costs and expenses incurred by the Class Representatives. For
the reasons that follow, Plaintiffs' motions are granted.
1 The Proposed Settlement seeks to settle c laims against
Defendants Facebook, Inc. ( "Facebook" or th e " Company) ; Mark
Zuckerberg, Sheryl K. Sandberg, David A. Ebersman, David M.
Spillane, Marc L. Andreessen, Erskine B. Bowles, James W.
Breyer, Donald E. Graham, Reed Hastings, and Peter A. Thiel
(collectively , the "Individual Defendants"); and the Underwriter
Defendants (which , together with Facebook and the Indi vidual
Defendants, are "Defendants")in the amount o f $35,000,000.
4
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, J
Prior Proceedings
The procedural history and factual background of this
litigation has been detailed extensively in various opinions by
the Court. See In re Facebook, Inc., IPO Sec. & Derivative
Litig., MDL No. 12-2389, 2016 WL 5080152, at *1 (S.D.N.Y. July
7, 2016) (the "Dis covery Opinion"); In re Facebook, Inc., IPO
Sec. & Derivative Litig., 312 F.R.D. 332, 337 (S .D.N.Y. 2015)
(the "Class Certification Opinion") ; In re Facebook, Inc., IPO
Sec. & Deriv. Litig., 986 F. Supp. 2d 487, 492-93 (S.D.N.Y.
2013) motion to certify appeal denied In re Facebook , Inc., IPO
Sec. & Derivative Litig., 986 F. Supp. 2d 524 (S .D.N.Y. 2014)
(the "MTD Opinion"); see also In re Facebook, Inc., IPO Sec. &
Derivative Litig., 288 F.R.D. 26 , 3 1- 34 (S.D.N.Y. 2012) (the
"C onsolidat i on Opinion " ) . Familiarity with the general
background of this case as provided in previous opinions of the
Court is assumed.
The present case is a consolidation of many separate
actions brought before this Court pursuant to the transfer order
of the United States Judicial Panel on Multidistrict Litigation
(the "MDL Panel"), which was entered on October 4, 2012. On
February 28 , 2013 , following the Consolidation Opinion,
Plaintiffs filed their Complaint, which alleged violations of
5
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Sections 11, 12(a) (2), and 15 of the Securities Act of 1933 (the
"Securities Act"), 15 U.S.C. §§ 77k, 77l(a) (2) and 770.
The Plaintiffs' consolidated class action complaint
alleged, among other things, that certain disclosures made by
Defendants, in registration statement effective at the time of
its IPO (the "Registration Statement"), were materially false or
misleading.
On December 11, 2013, the Court denied
Defendants' motion to dismiss in its Opinion of that date.
Discovery commenced and, on December 29, 2015, the Court granted
Plaintiffs' motion for class certification pursuant to Federal
Rule of Civil Procedure 23, classifying two subclasses, one for
retail investors (the "Retail Investors") and one for
institutional investors (the "Institutional Investors," and
together, the "Class"), with certain exclusions as detailed in
the Class Certification Opinion. 2 See Class Certification
Opinion, 312 F.R.D. at 338.
2 The two subclasses were defined as "(i) the Institutional
Investor Subclass, consisting of the institutional investors
that purchased or otherwise acquired [Facebook's] Class A common
stock in or traceable to [Facebook's IPO] between May 17, 2012
and May 21, 2012, inclusive, [the "Class Period"] and were
damaged thereby; and (ii) the Retail Investor Subclass,
consisting of all retail investors who purchased or otherwise
acquired Facebook Class A common stock in or traceable to the
6
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LSE3is
On February 1, 2012, Facebook, a worldwide social
media company, filed its initial Form S-1 Registration Statement
with the Securities and Exchange Commission ("SEC") in
(Defs.'
preparation for an initial public offering ("IPO"). 56.1
P1s.'
1 1; 56.1 1 22.) At the end of the first quarter of 2012,
Facebook had nine hundred million monthly active users ("MAU"),
constituting approximately 13% of the world's population; of
those MAUs, 45.8% accessed Facebook through personal computers
only, 45.0% accessed Facebook on both personal computers and
mobile devices, and 9.2% accessed Facebook only on mobile
(Defs.'
devices. 56.1 11 3-4.)
Around the end of 2011 and beginning of 2012,
Facebook's senior management observed that Facebook users were
using Facebook on mobile devices as a substitute for personal
use.3 els.'
computer (See 56.1 11 14, 21, 26.) Mobile devices
[Facebook's] IPO between May 17, 2012 and May 21, 2012,
thereby."
inclusive, and were damaged (Dkt. No. 193 at 2.)
3 The parties disputed Facebook's perception of and response
to the proliferation of mobile users, as reflected in internal
conversations and third-party analyses. To the extent factual
disputes remain, they have been omitted from this opinion.
7
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allowed non-personal computer users to access Facebook and
increased the ability of users to consume Facebook content more
Defs.'
often and from more locations. (See 56.1 11 76-77.) Prior
to March 2012, however, Facebook did not have any advertisements
shown for users accessing the website on mobile devices, which
(Defs.'
limited direct revenue from mobile users. 56.1 11 80,
88.) Up to that point, the majority of Facebook's revenue came
from desktop advertising and fee payments associated with
personal computer advertising as well as virtual and digital
(Pls.' Defs.'
goods sales. 56.1 1 11; 56.1 11 37-38.) Around the
end of 2011 and beginning of 2012, Facebook had begun
investigating the impact of mobile usage and its potential to
Pls.'
cannibalize or supplement personal computer usage. (j‡ge
Defs.' Pls.'
56.1 1 18; 56.1 11 85-87; 56.1 Response 11 85-87.)
In the months leading up to its IPO, Facebook adjusted
downward its internal forecasted revenue numbers. On December 8,
2011, Facebook's Board of Directors (the "Board") discussed the
IPO, selected Morgan Stanley, along with J.P. Morgan and Goldman
Sachs, as lead underwriter for the IPO, and set Facebook's
internal revenue forecast for 2012 at $6.6 billion with second
billion.4 (Pls.'
quarter 2012 revenue forecasts at $1.53 56.1
____ _
4 on Facebook's Board directors had been
By 2012, average,
(Pls.' Defs.'
serving for several years. Individual 56.1
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1 19; Individual Defs.' 56.1 1 4.) The Board met several times
during the end of January 2012, during which time Board
directors discussed Facebook's latest draft registration
statement, asked questions, and discussed disclosures. (See
Individual Defs.' 56.1 11 6-11.)
By February 1, 2012, Facebook's annual internal
revenue forecast was reduced to $ 6. 2 3 billion. ( Pls.' 5 6. 1
1 22.) On February 16, 2012, Facebook's Board was informed that
revenue was tracking below expectations for several reasons,
including that "Canvas 5 traffic has declined, negatively
impacting Payments and Ads revenue," "[s]lower than planned
uptake on Sponsored Stories driven by limited amount of
'sponsorable' content," "Facebook mobile use increasing," and
"[p]otential softness in advertiser demand." (Rizio-Hamilton
Deel., Ex. 34; see Pls.' 56.1 1 23.) At the February 16 meeting,
Response 11 1-2.) The Board was asked to allocate significant
time in the first half of 2012 to assist with the IPO and met
several times during the IPO process. ( See Pls.' Indi victual
Defs.' 56.1 Response 11 3, 5-6.)
5 "Canvas" is a Facebook product that was only available on
desktops and a part of Facebook's "Payment" Business; "Canvas"
provided a "webpage canvas for 'third-party developers to show
their content," often games, from which Facebook users could
purchase virtual and digital goods and for which Facebook
collected fees for hosting the developers' products. (Pls.' 56.1
1 11.) At the time of the IPO, this was the source of
"substantially all" of Facebook' s revenue. (Id. ; see also Pls.'
56.1 1 1 2 2)
9
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the Board also created a Pricing Committee for the IPO, which
was composed of Andreessen, Breyer, and Thiel. (Individual
Def s . ' 5 6 . 1 ':lI 12 . )
On March 19, 2012, Facebook's annual internal revenue
forecast was reduced to $5.6 billion. (Pls. ' 56.1 ':lI 25 . ) When
informed that this number was likely to drop further to $5.2
billion, Sandberg stated that this was a "real problem." (Pls. '
56.1 ':lI 29.) Around this time , in response to the observed
revenue growth and revenue forecast decline, Facebook
established a "war room" to analyze and address the trend.
( Pls.' 5 6. 1 ':ll':ll 2 6- 27.) Members of the "war room" looked, in
part, at the financial impact of existing and new Facebook users
accessing Facebook on mobile devices. (Id.)
In late March 2012 , Kurt Runke ("Runke") , Facebook's
Advertising Inventory Manager and participant in the "war room,"
circulated analysis regarding the declining revenue growth using
data from late 2011 and early 2012. (Defs.' 56.1 ':lI 96.) As part
of his analysis, Runke wrote that users who increased Facebook
use on mobile devices varied in how their use impacted
Facebook's revenue growth , but also wrote that "the short-term
impact of encouraging existing users to become active on mobile
is that it will decrease our revenue" and that it is "likely
10
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that increased mobile adoption over the last year has reduced FB
revenue by a few percentage (based on rough analysis of data,
underway)." (Pls.'
56.1 Response 1 96.) Runke also stated that,
as the number of desktop users increased, determining the
clear." (Defs.'
"impact of mobile on web monetization [was] not
56.1 1 97.)
room"
Members of the "war presented their initial
analysis to Sandberg, Facebook's Chief Operating Officer
("COO"), and Ebersman, Facebook's Chief Financial Officer
("CFO"), on March 29, 2012, which was subsequently circulated to
(Pls.'
Facebook's senior officers, including Zuckerberg. 56.1
11 29-30, 34-35.) Shortly thereafter, on April 4, Zuckerberg
badly"
wrote that "everything here is going really and that
Facebook's "revenue projection has gone down so much we now
continue."
think we might go public at less than $50b if things
(Pls.'
56.1 1 37.) A few days later, on April 9, Zuckerberg
wrote to Ebersman that Zuckerberg was "scared that we're just
way behind in a few key areas. Mobile is the biggest, where
Wilde will dig us out of the hole we're in but otherwise not be
amazing." (Pls.'
particularly 56.1 1 16.)
On April 12, 2012, Zuckerberg and other Facebook
management discussed the mobile usage trend with the Board at a
11
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dinner meeting . (See Individual Defs . ' 56 . 1 '.II 13 . ) The "initial
analyses" of the "war room" examined first quarter revenue
"drivers" and stated, among other things , that the "shift from
web to mobile - can hurt revenue per user by as much as 25 %" and
that Facebook "see[s] a drop in revenue among users that
increase their mobile usage (versus similar users that keep
their mobi l e constant). " (P l s .' 56 . 1 '.II 30 . )
On April 13 , 2012 , Facebook's Board received a
presentation entitled "2012 Financial Forecast Update , " which
noted that "revenue was running lower than p l an" and indicated
Facebook would issue a downward revenue forecast. (Pls . ' 56.1
'.II 39 . ) The presentation listed factors that " ha[d ] driven this
change , " one of which was an "ongoing shift to mobile usage";
the presentation did not state a quantification of the lost
revenue. (Id. ; Defs .' 56 . 1 .Response '.II 39 . ) Facebook ' s management
presented to the Board a revenue forecast of $5 . 16 billion for
2 012 and some of the "war room" analysis . ( Indi victual Defs .'
56 . 1 '.II 14; Defs. ' 56 . 1 '.II 65; see Pls.' 56.1 '.II 42.) Members of
the Facebook Board received a copy of the presentation and
management's updates, which were reviewed at the Board meeting .
(See Pls . ' 56.1 '.II'.II 38-40; Individual Defs. ' 56 . 1 '.II 17 . )
12
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On the same day, Sandberg distributed a "2012 Revenue
& Growth Analysis" presentation to Facebook's Business
Operations group that included slides stating that while MAUs
increased, users were shifting to mobile, and that such a shift
"could hurt revenue per user as much as 25 %." (Pls.' 56.1 1 42.)
On April 16, 2012, Ebersman met with investment bank
analysts underwriting Facebook's IPO (the "Syndicate Analysts")
and informed them that Facebook had revised its 2012 annual
revenue estimate to around $5 billion, with second quarter
revenue earnings estimated to be between $1.1 and $1.2 billion.
( P1 s. ' 5 6. 1 <31 4 6; Def s. ' 5 6. 1 <31 16. )
On April 23, 2012, Facebook filed an Amended Form S-1,
which reported first quarter 2012 revenue of $1.058 billion, a
44.7 % growth from 2011's first quarter revenue but a 6.8 %
decline from 2011's fourth quarter revenue of $1.131 billion.
(Defs.' 56.1 1 7; Pls.' 56.1 Response 1 7; Pls.' 56.1 1 51.) The
Amended Form S-1 noted in numerous locations that Facebook's
advertising revenue "may" or "could" be affected by users
switching from using Facebook on personal computers to mobile
devices. ( See Def s.' 5 6. 1 Response 1 52. )
13
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On May 3, 2012, Runke shared additional mobile usage
revenue analysis, similar to prior analysis but with more data,
(Pls.'
with Susan Li ("Li"), Facebook's Finance Manager. 56.1
1 55.) This analysis modeled a hypothetical number of Facebook
users moving from a desktop computer to a mobile device, which
appeared to result in a reduction in revenue site-wide. (Id.)
In the succeeding days, members of Facebook's
management discussed amongst themselves how to address
Facebook's reduced 2012 annual estimate to $4.9 billion and that
Pls.'
revenue numbers had been declining week over week. (See
56.1 SS 56-60.) For example, on May 5, 2012, Li emailed
Sandberg, Ebersman, and others, stating that "we have been
seeing ongoing softness since Tuesday evening causing revenue to
be down roughly 5% week over week and the ads team plus
speak." (Pls.'
analytics folks are actively investigating as we
56.1 1 56.) That same day, Ebersman left a voicemail for
Sandberg, observing that "[r]evenue is actually down week over
often." (Pls.'
week which to my experience we haven't seen very
56.1 1 59.)
14
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FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 NYSCEF DOC. NO. 75 RECEIVED NYSCEF: 02/18/2021 Exhibit 4 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case1:12-md-02389-RWS-GWG 601 NYSCEF DOC. NO. 75 Document Filed 11/26/18 RECEIVEDl NYSCEF: Page of 55 02/18/2021 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------------X IN RE FACEBOOK, INC., IPO SECURITIES AND MDL No. 12-2389 DERIVATIVE LITIGATION, OPINION & ORDER ----------------------------------------X 31 A P P E A R A N C E S: USDC SDNY I DO . | E TRONI / FILED Attorneys for Lead Plaintiffs DOC #: h LABATON SUCHAROW LLP DATE FILED: - ---- 140 Broadway New York, NY 10005 By: Thomas A. Dubbs, Esq. James W. Johnson, Esq. Thomas G. Hoffman, Jr., Esq. BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP 1251 Avenue of the 44th Floor Americas, New York, NY 10019 By: Max W. Berger, Esq. Salvatore J. Graziano, Esq. John Rizio-Hamilton, Esq. Jonathan Uslaner, Esq. Jai Chandrasekhar, Esq. Attorneys for Additional Named Plaintiffs and Class Representatives Mr. & Mrs. Galvan LIEFF CABRASER HEIMANN & BERNSTEIN LLP 250 Hudson 8th F1OOr Street, New York, NY 10013 By: Steven E. Fineman, Esq. Nicholas Diamand, Esq. Attorneys for Additional Named Plaintiffs and Class Representatives Rand and Mr. & Mrs. Melton FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 NYSCEF Case DOC. NO. 75 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 Page 2 NYSCEF: RECEIVED of 55 02/18/2021 I HACH ROSE SCHIRRIPA & CHEVERIE LLP 185 Madison Avenue New York, NY 10016 By: Frank R. Schirripa, Esq. Attorneys for Defendant Facebook and Individual Facebook Defendants KIRKLAND & ELLIS LLP 655 Fifteenth St. NW Washington, DC 20005 By: Susan E. Engel, Esq. Beth A. Williams, Esq. KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, NY 10022 By: Andrew B. Clubok, Esq. Brant W. Bishop, Esq. Nathaniel Kritzer, Esq. KIRKLAND & ELLIS LLP 555 California Street, #2700 San Francisco, CA 94104 By: Elizabeth L. Deeley, Esq. WILLKIE FARR & GALLAGHER LLP 1875 K Street, NW Washington, DC 20006 By: Richard D. Bernstein, Esq. Elizabeth J. Bower, Esq. Matthew Edwards, Esq. WILKIE FARR & GALLAGHER LLP 787 Seventh Avenue New York, NY 10019-6099 By: Todd G. Cosenza, Esq. Attorneys for Underwriter Defendants DAVIS POLK & WARDWELL LLP 450 Lexington Avenue New York, NY 10017 By: James P. Rouhandeh, Esq. Charles S. Duggan, Esq. Andrew Ditchfield, Esq. 2 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case NYSCEF DOC. NO. 75 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 Page 3 NYSCEF: RECEIVED of 55 02/18/2021 Attorneys for Defendant James W. Breyer WILSON SONSINI GOODRICH & ROSATI 650 Page Mill Road Palo Alto, CA 94304 By: Nina F. Locker, Esq. Doru Gavril, Esq. Liles H. Repp, Esq. 3 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case .,. DOC. NO. 75 NYSCEF 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 RECEIVED4 NYSCEF: Page of 55 02/18/2021 Sweet, D.J. Lead Plaintiffs Arkansas Teacher Retirement System and Fresno County Employees' Retirement Association, Named Plaintiffs and Class Representati v es Jose G. Galvan and Mary Jane Lule Galvan, and Class Representatives Eric Rand, Paul Melton, Lynn Melton, and Sharon Morley (together, "Plaintiffs") have moved under Rule 23(e) for final approval of the Proposed Settlement 1 and approval of a plan for its allocation (the "Plan of Al l ocation " ). Court -appointed lead c lass counsel , Bernstein Litowitz Berger & Grossman LLP and Labaton Sucharow LLP ("Lead Counsel " ) have moved for a Lead Counsel Award of Attorneys' fees, for payment of litigation expenses, and for payment of costs and expenses incurred by the Class Representatives. For the reasons that follow, Plaintiffs' motions are granted. 1 The Proposed Settlement seeks to settle c laims against Defendants Facebook, Inc. ( "Facebook" or th e " Company) ; Mark Zuckerberg, Sheryl K. Sandberg, David A. Ebersman, David M. Spillane, Marc L. Andreessen, Erskine B. Bowles, James W. Breyer, Donald E. Graham, Reed Hastings, and Peter A. Thiel (collectively , the "Individual Defendants"); and the Underwriter Defendants (which , together with Facebook and the Indi vidual Defendants, are "Defendants")in the amount o f $35,000,000. 4 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 NYSCEF DOC. Case NO. 75 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 Page 5 NYSCEF: RECEIVED of 55 02/18/2021 , J Prior Proceedings The procedural history and factual background of this litigation has been detailed extensively in various opinions by the Court. See In re Facebook, Inc., IPO Sec. & Derivative Litig., MDL No. 12-2389, 2016 WL 5080152, at *1 (S.D.N.Y. July 7, 2016) (the "Dis covery Opinion"); In re Facebook, Inc., IPO Sec. & Derivative Litig., 312 F.R.D. 332, 337 (S .D.N.Y. 2015) (the "Class Certification Opinion") ; In re Facebook, Inc., IPO Sec. & Deriv. Litig., 986 F. Supp. 2d 487, 492-93 (S.D.N.Y. 2013) motion to certify appeal denied In re Facebook , Inc., IPO Sec. & Derivative Litig., 986 F. Supp. 2d 524 (S .D.N.Y. 2014) (the "MTD Opinion"); see also In re Facebook, Inc., IPO Sec. & Derivative Litig., 288 F.R.D. 26 , 3 1- 34 (S.D.N.Y. 2012) (the "C onsolidat i on Opinion " ) . Familiarity with the general background of this case as provided in previous opinions of the Court is assumed. The present case is a consolidation of many separate actions brought before this Court pursuant to the transfer order of the United States Judicial Panel on Multidistrict Litigation (the "MDL Panel"), which was entered on October 4, 2012. On February 28 , 2013 , following the Consolidation Opinion, Plaintiffs filed their Complaint, which alleged violations of 5 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 , Case NYSCEF DOC. NO. 75 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 Page 6 NYSCEF: RECEIVED of 55 02/18/2021 Sections 11, 12(a) (2), and 15 of the Securities Act of 1933 (the "Securities Act"), 15 U.S.C. §§ 77k, 77l(a) (2) and 770. The Plaintiffs' consolidated class action complaint alleged, among other things, that certain disclosures made by Defendants, in registration statement effective at the time of its IPO (the "Registration Statement"), were materially false or misleading. On December 11, 2013, the Court denied Defendants' motion to dismiss in its Opinion of that date. Discovery commenced and, on December 29, 2015, the Court granted Plaintiffs' motion for class certification pursuant to Federal Rule of Civil Procedure 23, classifying two subclasses, one for retail investors (the "Retail Investors") and one for institutional investors (the "Institutional Investors," and together, the "Class"), with certain exclusions as detailed in the Class Certification Opinion. 2 See Class Certification Opinion, 312 F.R.D. at 338. 2 The two subclasses were defined as "(i) the Institutional Investor Subclass, consisting of the institutional investors that purchased or otherwise acquired [Facebook's] Class A common stock in or traceable to [Facebook's IPO] between May 17, 2012 and May 21, 2012, inclusive, [the "Class Period"] and were damaged thereby; and (ii) the Retail Investor Subclass, consisting of all retail investors who purchased or otherwise acquired Facebook Class A common stock in or traceable to the 6 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 Page7 of 55 NYSCEF DOC. NO. 75 RECEIVED NYSCEF: 02/18/2021 LSE3is On February 1, 2012, Facebook, a worldwide social media company, filed its initial Form S-1 Registration Statement with the Securities and Exchange Commission ("SEC") in (Defs.' preparation for an initial public offering ("IPO"). 56.1 P1s.' 1 1; 56.1 1 22.) At the end of the first quarter of 2012, Facebook had nine hundred million monthly active users ("MAU"), constituting approximately 13% of the world's population; of those MAUs, 45.8% accessed Facebook through personal computers only, 45.0% accessed Facebook on both personal computers and mobile devices, and 9.2% accessed Facebook only on mobile (Defs.' devices. 56.1 11 3-4.) Around the end of 2011 and beginning of 2012, Facebook's senior management observed that Facebook users were using Facebook on mobile devices as a substitute for personal use.3 els.' computer (See 56.1 11 14, 21, 26.) Mobile devices [Facebook's] IPO between May 17, 2012 and May 21, 2012, thereby." inclusive, and were damaged (Dkt. No. 193 at 2.) 3 The parties disputed Facebook's perception of and response to the proliferation of mobile users, as reflected in internal conversations and third-party analyses. To the extent factual disputes remain, they have been omitted from this opinion. 7 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case Document 601 Filed 11/26/18 of 55 NYSCEF DOC. NO. 75 1:12-md-02389-RWS-GWG RECEIVED8 NYSCEF: Page 02/18/2021 allowed non-personal computer users to access Facebook and increased the ability of users to consume Facebook content more Defs.' often and from more locations. (See 56.1 11 76-77.) Prior to March 2012, however, Facebook did not have any advertisements shown for users accessing the website on mobile devices, which (Defs.' limited direct revenue from mobile users. 56.1 11 80, 88.) Up to that point, the majority of Facebook's revenue came from desktop advertising and fee payments associated with personal computer advertising as well as virtual and digital (Pls.' Defs.' goods sales. 56.1 1 11; 56.1 11 37-38.) Around the end of 2011 and beginning of 2012, Facebook had begun investigating the impact of mobile usage and its potential to Pls.' cannibalize or supplement personal computer usage. (j‡ge Defs.' Pls.' 56.1 1 18; 56.1 11 85-87; 56.1 Response 11 85-87.) In the months leading up to its IPO, Facebook adjusted downward its internal forecasted revenue numbers. On December 8, 2011, Facebook's Board of Directors (the "Board") discussed the IPO, selected Morgan Stanley, along with J.P. Morgan and Goldman Sachs, as lead underwriter for the IPO, and set Facebook's internal revenue forecast for 2012 at $6.6 billion with second billion.4 (Pls.' quarter 2012 revenue forecasts at $1.53 56.1 ____ _ 4 on Facebook's Board directors had been By 2012, average, (Pls.' Defs.' serving for several years. Individual 56.1 8 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case NYSCEF DOC. NO. 75 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 Page 9 NYSCEF: RECEIVED of 55 02/18/2021 1 19; Individual Defs.' 56.1 1 4.) The Board met several times during the end of January 2012, during which time Board directors discussed Facebook's latest draft registration statement, asked questions, and discussed disclosures. (See Individual Defs.' 56.1 11 6-11.) By February 1, 2012, Facebook's annual internal revenue forecast was reduced to $ 6. 2 3 billion. ( Pls.' 5 6. 1 1 22.) On February 16, 2012, Facebook's Board was informed that revenue was tracking below expectations for several reasons, including that "Canvas 5 traffic has declined, negatively impacting Payments and Ads revenue," "[s]lower than planned uptake on Sponsored Stories driven by limited amount of 'sponsorable' content," "Facebook mobile use increasing," and "[p]otential softness in advertiser demand." (Rizio-Hamilton Deel., Ex. 34; see Pls.' 56.1 1 23.) At the February 16 meeting, Response 11 1-2.) The Board was asked to allocate significant time in the first half of 2012 to assist with the IPO and met several times during the IPO process. ( See Pls.' Indi victual Defs.' 56.1 Response 11 3, 5-6.) 5 "Canvas" is a Facebook product that was only available on desktops and a part of Facebook's "Payment" Business; "Canvas" provided a "webpage canvas for 'third-party developers to show their content," often games, from which Facebook users could purchase virtual and digital goods and for which Facebook collected fees for hosting the developers' products. (Pls.' 56.1 1 11.) At the time of the IPO, this was the source of "substantially all" of Facebook' s revenue. (Id. ; see also Pls.' 56.1 1 1 2 2) 9 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case NYSCEF DOC. NO. 751:12-md-02389-RWS-GWG Document 601 Filed 11/26/18RECEIVED Page 10NYSCEF: of 55 02/18/2021 the Board also created a Pricing Committee for the IPO, which was composed of Andreessen, Breyer, and Thiel. (Individual Def s . ' 5 6 . 1 ':lI 12 . ) On March 19, 2012, Facebook's annual internal revenue forecast was reduced to $5.6 billion. (Pls. ' 56.1 ':lI 25 . ) When informed that this number was likely to drop further to $5.2 billion, Sandberg stated that this was a "real problem." (Pls. ' 56.1 ':lI 29.) Around this time , in response to the observed revenue growth and revenue forecast decline, Facebook established a "war room" to analyze and address the trend. ( Pls.' 5 6. 1 ':ll':ll 2 6- 27.) Members of the "war room" looked, in part, at the financial impact of existing and new Facebook users accessing Facebook on mobile devices. (Id.) In late March 2012 , Kurt Runke ("Runke") , Facebook's Advertising Inventory Manager and participant in the "war room," circulated analysis regarding the declining revenue growth using data from late 2011 and early 2012. (Defs.' 56.1 ':lI 96.) As part of his analysis, Runke wrote that users who increased Facebook use on mobile devices varied in how their use impacted Facebook's revenue growth , but also wrote that "the short-term impact of encouraging existing users to become active on mobile is that it will decrease our revenue" and that it is "likely 10 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case 1:12-md-02389-RWS-GWG Document 601 Filed 11/26/18 NYSCEF DOC. NO. 75 RECEIVED11 NYSCEF: Page of 55 02/18/2021 that increased mobile adoption over the last year has reduced FB revenue by a few percentage (based on rough analysis of data, underway)." (Pls.' 56.1 Response 1 96.) Runke also stated that, as the number of desktop users increased, determining the clear." (Defs.' "impact of mobile on web monetization [was] not 56.1 1 97.) room" Members of the "war presented their initial analysis to Sandberg, Facebook's Chief Operating Officer ("COO"), and Ebersman, Facebook's Chief Financial Officer ("CFO"), on March 29, 2012, which was subsequently circulated to (Pls.' Facebook's senior officers, including Zuckerberg. 56.1 11 29-30, 34-35.) Shortly thereafter, on April 4, Zuckerberg badly" wrote that "everything here is going really and that Facebook's "revenue projection has gone down so much we now continue." think we might go public at less than $50b if things (Pls.' 56.1 1 37.) A few days later, on April 9, Zuckerberg wrote to Ebersman that Zuckerberg was "scared that we're just way behind in a few key areas. Mobile is the biggest, where Wilde will dig us out of the hole we're in but otherwise not be amazing." (Pls.' particularly 56.1 1 16.) On April 12, 2012, Zuckerberg and other Facebook management discussed the mobile usage trend with the Board at a 11 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 , I : NYSCEF DOC. Case NO. 751:12-md-02389-RWS-GWG Document 601 Filed 11/26/18RECEIVED Page 12NYSCEF: of 55 02/18/2021 dinner meeting . (See Individual Defs . ' 56 . 1 '.II 13 . ) The "initial analyses" of the "war room" examined first quarter revenue "drivers" and stated, among other things , that the "shift from web to mobile - can hurt revenue per user by as much as 25 %" and that Facebook "see[s] a drop in revenue among users that increase their mobile usage (versus similar users that keep their mobi l e constant). " (P l s .' 56 . 1 '.II 30 . ) On April 13 , 2012 , Facebook's Board received a presentation entitled "2012 Financial Forecast Update , " which noted that "revenue was running lower than p l an" and indicated Facebook would issue a downward revenue forecast. (Pls . ' 56.1 '.II 39 . ) The presentation listed factors that " ha[d ] driven this change , " one of which was an "ongoing shift to mobile usage"; the presentation did not state a quantification of the lost revenue. (Id. ; Defs .' 56 . 1 .Response '.II 39 . ) Facebook ' s management presented to the Board a revenue forecast of $5 . 16 billion for 2 012 and some of the "war room" analysis . ( Indi victual Defs .' 56 . 1 '.II 14; Defs. ' 56 . 1 '.II 65; see Pls.' 56.1 '.II 42.) Members of the Facebook Board received a copy of the presentation and management's updates, which were reviewed at the Board meeting . (See Pls . ' 56.1 '.II'.II 38-40; Individual Defs. ' 56 . 1 '.II 17 . ) 12 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 NYSCEF Case DOC. NO. 751:12-md-02389-RWS-GWG Document 601 Filed 11/26/18RECEIVED Page 13NYSCEF: of 55 02/18/2021 I On the same day, Sandberg distributed a "2012 Revenue & Growth Analysis" presentation to Facebook's Business Operations group that included slides stating that while MAUs increased, users were shifting to mobile, and that such a shift "could hurt revenue per user as much as 25 %." (Pls.' 56.1 1 42.) On April 16, 2012, Ebersman met with investment bank analysts underwriting Facebook's IPO (the "Syndicate Analysts") and informed them that Facebook had revised its 2012 annual revenue estimate to around $5 billion, with second quarter revenue earnings estimated to be between $1.1 and $1.2 billion. ( P1 s. ' 5 6. 1 <31 4 6; Def s. ' 5 6. 1 <31 16. ) On April 23, 2012, Facebook filed an Amended Form S-1, which reported first quarter 2012 revenue of $1.058 billion, a 44.7 % growth from 2011's first quarter revenue but a 6.8 % decline from 2011's fourth quarter revenue of $1.131 billion. (Defs.' 56.1 1 7; Pls.' 56.1 Response 1 7; Pls.' 56.1 1 51.) The Amended Form S-1 noted in numerous locations that Facebook's advertising revenue "may" or "could" be affected by users switching from using Facebook on personal computers to mobile devices. ( See Def s.' 5 6. 1 Response 1 52. ) 13 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 601 Filed Case NYSCEF DOC. NO. 75 1:12-md-02389-RWS-GWG Document 11/26/18 RECEIVED14 NYSCEF: Pageof 55 02/18/2021 On May 3, 2012, Runke shared additional mobile usage revenue analysis, similar to prior analysis but with more data, (Pls.' with Susan Li ("Li"), Facebook's Finance Manager. 56.1 1 55.) This analysis modeled a hypothetical number of Facebook users moving from a desktop computer to a mobile device, which appeared to result in a reduction in revenue site-wide. (Id.) In the succeeding days, members of Facebook's management discussed amongst themselves how to address Facebook's reduced 2012 annual estimate to $4.9 billion and that Pls.' revenue numbers had been declining week over week. (See 56.1 SS 56-60.) For example, on May 5, 2012, Li emailed Sandberg, Ebersman, and others, stating that "we have been seeing ongoing softness since Tuesday evening causing revenue to be down roughly 5% week over week and the ads team plus speak." (Pls.' analytics folks are actively investigating as we 56.1 1 56.) That same day, Ebersman left a voicemail for Sandberg, observing that "[r]evenue is actually down week over often." (Pls.' week which to my experience we haven't seen very 56.1 1 59.) 14 FILED: NEW YORK COUNTY CLERK 02/18/2021 06:00 PM INDEX NO. 656021/2019 Case 1:12-m