SEC questioned Facebook about Zynga, mobile

Associated Press Modified: June 15, 2012 at 5:00 pm •  Published: June 15, 2012
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NEW YORK (AP) — As Facebook's much-anticipated public stock offering approached, federal regulators wanted to know more about the revenue it gets from mobile devices, its $1 billion deal to buy Instagram and the control CEO Mark Zuckerberg has over the company.

Documents filed Friday show the back-and-forth the social-networking company had with the Securities and Exchange Commission on a variety of issues. As all companies do, Facebook Inc. amended its regulatory documents several times ahead of its initial public offering of stock. But the communications leading to those changes weren't public until now.

Facebook disclosed its letters with the SEC in regulatory filings Friday. The filings are a usual part of the IPO process. The letters are typically confidential until about 30 days following an IPO. Facebook's IPO took place May 17.

The communications in the months leading to Facebook's IPO have received greater scrutiny in part because of investor concerns about the company's ability to make money from its growing mobile audience. Facebook's stock price has lost more than a fifth of its value since the IPO. Many analysts, however, hold positive long-term opinions.

Facebook faces more than 40 lawsuits over the IPO. The lawsuits allege that analysts at the large underwriting investment banks cut their second-quarter and full-year forecasts for Facebook just before the IPO and told only a handful of clients. Facebook has called the lawsuits "without merit."

In a separate filing Friday, the company sought to consolidate the lawsuits in New York and laid the groundwork for its case, arguing that it did not violate any rules and followed "customary practices" throughout the process. They also suggest that trading problems at the Nasdaq Stock Market contributed to the stock price drop.

Much of the SEC's questions asked Facebook to clarify or explain things better. In its first letter in February, the SEC asked Facebook what it would mean if more of its users accessed the site through mobile devices rather than traditional computers. The SEC wanted Facebook to fully address "the potential consequences to your revenue and financial results rather than just stating that they 'may be negatively affected.'"

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