Lowinger v. Morgan Stanley & Co.
United States Court of Appeals for the Second Circuit
841 F.3d 122 (2016)
Goldman Sachs & Company, Morgan Stanley & Company, LLC, and J.P. Morgan Securities LLC (defendants) underwrote Facebook's IPO, each individually owning less than 10 percent of Facebook stock but collectively owning more, while being subject to a standard lock-up agreement barring sales of pre-IPO stock for 91 to 211 days without underwriter approval. Robert Lowinger (plaintiff), a Facebook shareholder, sued the underwriters under section 16 of the Securities Exchange Act, alleging inadequate disclosure of revised revenue estimates and pre-IPO securities holdings; the district court dismissed the complaint because the underwriters did not constitute a "group" meeting section 16(b)'s 10 percent threshold, and Lowinger appealed.
Whether, for purposes of establishing the 10-percent-ownership threshold in a claim under section 16(b) of the Securities Exchange Act of 1934, a standard lock-up agreement alone is sufficient to aggregate the stock ownership of the parties subject to the agreement.