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I think I understand the CA scandal well, but how could it be reasonably expected for Facebook to give investors adequate notice that a third party could misuse

by aprilthird2021 2y ago

I think I understand the CA scandal well, but how could it be reasonably expected for Facebook to give investors adequate notice that a third party could misuse their targeted ads feature (to my knowledge CA did not hack FB, they simply used targeted ads)? It's as if expecting recently IPO'd Beyond Meat to disclose to investors the possibility that someone might choke on a meatball they make with the meat...

ninth_ant 2y ago
Yes, companies are legally obligated to disclose risks. But that’s not even what this is about. Facebook _did_ disclose those risks, but just not strongly worded enough in the hopes of the plaintiffs.
parsimo2010 2y ago
Regular risks/hazards that are present for every product don’t need to be disclosed, but if there is something about your product that presents a unique risk, you need to disclose it to investors. Investors normally don’t worry about mundane risks being disclosed, so there will probably be statements like “if the overall plant-based food sector does not grow as fast as our projections then we may not hit our growth/profitability targets next quarter,” which is totally expected and usually disclosed. In your example, if Beyond knew that their plant-based meatballs were harder to chew/swallow than regular meat-based meatballs, and there were emails showing that executives knew and chose not to say anything about it to investors, then they could be sued if people choked and an ensuing scandal hurt the stock price. Similarly, the FB investors are hoping to show that FB executives knew something more about Cambridge Analytica and chose not to disclose it, or chose to downplay the risk. That’s fraud. The issue isn’t that something bad happened, investors have to take risks. The issue is whether FB knew, and misled investors by lying or intentionally misleading wording.
- aprilthird2021 2y ago
  > The issue isn’t that something bad happened, investors have to take risks. The issue is whether FB knew, and misled investors by lying or intentionally misleading wording. Thanks for the clarification. Let's see what happens.

ninth_ant 2y ago

Yes, companies are legally obligated to disclose risks. But that’s not even what this is about. Facebook _did_ disclose those risks, but just not strongly worded enough in the hopes of the plaintiffs.

parsimo2010 2y ago

Regular risks/hazards that are present for every product don’t need to be disclosed, but if there is something about your product that presents a unique risk, you need to disclose it to investors. Investors normally don’t worry about mundane risks being disclosed, so there will probably be statements like “if the overall plant-based food sector does not grow as fast as our projections then we may not hit our growth/profitability targets next quarter,” which is totally expected and usually disclosed. In your example, if Beyond knew that their plant-based meatballs were harder to chew/swallow than regular meat-based meatballs, and there were emails showing that executives knew and chose not to say anything about it to investors, then they could be sued if people choked and an ensuing scandal hurt the stock price. Similarly, the FB investors are hoping to show that FB executives knew something more about Cambridge Analytica and chose not to disclose it, or chose to downplay the risk. That’s fraud. The issue isn’t that something bad happened, investors have to take risks. The issue is whether FB knew, and misled investors by lying or intentionally misleading wording.

aprilthird2021 2y ago
> The issue isn’t that something bad happened, investors have to take risks. The issue is whether FB knew, and misled investors by lying or intentionally misleading wording. Thanks for the clarification. Let's see what happens.