Angry investors seek money from Facebook lawsuits

— -- Q: Does it make sense for investors who lost money to join the lawsuits against Facebook?

Investors who bought Facebook shares at the initial public offering price of $38 a share have lost big. While the shares managed to close flat on their first day of trading, they've since dropped precipitously, losing roughly a third of their value in about a month of trading.

The poor reception Facebook received has stunned some investors, especially those who never bought an IPO before. Perhaps due to folklore of huge one-day pops being the norm with IPOs, investors assumed buying Facebook was a ticket to riches. But, in fact, IPOs are some of the riskiest stocks you can buy.

But now, some investors who lost money are trying to get some of it back, by turning to the legal system. A number of lawsuits have been filed on behalf of shareholders who lost money on Facebook.

There's nothing to stop you from joining some or all the securities class action lawsuits. The key allegation is that the IPO's underwriters knew that Facebook stock was overvalued, and that key information was only shared with some investors. The lead underwriter of the deal, Morgan Stanley, denies those charges and says it handled the offering properly.

Keep in mind, though, that these suits will not do much in terms of recovering losses for you. Historically, shareholders only recoup pennies on the dollars, on average, for any losses they suffer from securities class action suits. Most of any recovery there might be is ultimately claimed by the lawyers in terms of legal fees.

Also, there was no contract that said you were guaranteed to make money on the Facebook IPO. IPOs can and do fall from their offering prices, and that's part of the risk you accepted when you signed up for the deal.

Perhaps your best course of action is to consult with your brokerage firm. There were some technological glitches with the way Facebook stock traded on its first day. If your purchase of the stock wasn't priced correctly, due to a trading error, you may be able to negotiate with your brokerage firm to get some sort of correction or adjustment.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz