UNDATED (CNN) -- The fallout continues from Facebook's disappointing market debut Friday. Federal regulators are now eyeing the IPO, Congressional committees are holding briefings, and a group of shareholders has filed suit against the social networking giant.
It was the most talked-about IPO of the year. Now Facebook is being talked about for the wrong reasons. As the stock continues to struggle, top U.S. financial regulators are eyeing whether Morgan Stanley, one of the banks that put Facebook on the market, shared their less-than-rosy outlook for the social network with clients but not, a wider audience. Fortune Magazine managing editor Andy Serwer says, "They increased the size of the offering, they increased the price of the offering. At the same time, apparently, they were getting wind that they results of the company, the financial results, were a little bit weaker than anticipated."
in addition to scrutiny by the securities and exchange commission and the financial industry regulatory authority, a group of shareholders filed suit Wednesday in a Manhattan court.
The suit, against Facebook and CEO Mark Zuckerberg, as well as major banks, alleges key financial information wasn't disclosed before shares went public. Attorney representing Facebook shareholders Sam Rudman says, "There was material information that wasn't shared, or properly disclosed in the registration statement and prospectus prepared, in connection with the IPO."
A Facebook spokesperson said the suit is without merit and they will defend themselves vigorously.
Facebook's problems began before trading even started Friday. The stock was delayed by about 30 minutes while the NASDAQ sorted out technical problems.
The stock perked up at the open, but quickly dropped back down. Since then, it's failed to climb much higher than its $38 offering price amid sentiment that the company was overvalued.