North Carolina’s retirement system has seen the value of its Facebook investment plummet at least $4.1 million, according to newly filed legal documents.
The state’s retirement system last week joined a class action lawsuit against the social networking site and its underwriters, including Morgan Stanley and Goldman Sachs, that alleges the companies misrepresented Facebook’s initial public stock offer earlier this year. The original lawsuit was filed in May.
But the full extent of North Carolina’s exposure to the company’s dwindling stock value only became clear in court documents filed Aug. 9 in a New York federal court. The state disclosed the loss as it fights to be named among the lead plaintiffs in the case.
“Facebook and its underwriters told one thing to the public, but shared the real facts with only a few select investors on Wall Street,” State Treasurer Janet Cowell said in a statement. “Our goal is to recover our pension fund’s financial damages.”
The state pension fund – valued at $75.9 billion March 31 – provides retirement benefits for 850,000 current and former state workers.
The fund bought 685,737 shares of Facebook stock May 17 at the initial price of $38 a share, according to documents from the state treasurer’s office. The state’s stock portfolio managers then sold a small portion of the $26 million investment the next day, making about $215,000.
But the stock dropped nearly 20 percent in the first two days and now sits at nearly half its original value. The state’s reported $4.1 million unrealized loss is a legal calculation and the total amount could be much larger.
At the time of the filing last week, the state still held about 618,000 shares of Facebook stock, records show. Facebook’s stock closed Friday at $19.05, down eight-tenths of 1 percent for the day.
North Carolina argues in court documents that it deserves the preferred status as lead plaintiff because it suffered the biggest loss, by a wide margin, among the investors seeking to direct the lawsuit. The New York law firm Bernstein Litowitz Berger and Grossmann is representing the state.
But a competing law firm is raising questions about whether North Carolina can serve as lead plaintiff given the state treasurer’s ties to Facebook and Morgan Stanley board member Erskine Bowles, who is a named defendant in the lawsuit.
Attorney David Rosenfeld with law firm Robbins Geller Rudman and Dowd wrote in court documents that Cowell and the state pension fund “maintain significant personal and financial ties” with Bowles, a prominent Democrat who is the former head of the UNC system and two-time U.S. Senate candidate.
The filings assert that Bowles’ investment firm Carousel Capital manages millions of dollars in the state pension fund and Bowles wife, Crandall, was a fundraiser for Cowell’s campaign.
Cowell’s office did not respond Friday to questions about Bowles. The state’s attorney expects to file a response early next week..