Facebook Inc.’s move to change its capital structure was tainted by secret text messages and meddling from financial advisers that pointed to a process rife with conflicts of interest, according to investor lawsuits filed in Delaware.
Late last summer, Chief Executive Mark Zuckerberg asked the board to approve a plan to create a new class of nonvoting shares that would allow him to maintain control of the company he co-founded. The board formed a three-person special committee tasked with assessing the capital plan.
Morgan Stanley, which advised Facebook, appeared to pull the strings behind the scenes by convincing the board’s advisers to water down parts of the plan that would have been unfavorable to Mr. Zuckerberg, according to court documents filed by the plaintiffs.
Meanwhile, longtime Facebook director Marc Andreessen, who served on the special committee, was privately coaching Mr. Zuckerberg by text message on how to win over the other two directors, according to court documents. In one instance, Mr. Andreessen texted Mr. Zuckerberg during a March meeting of the special committee with progress reports. “NOW WE’RE COOKING WITH GAS,” Mr. Andreessen wrote.
The capital plan was approved by the eight-member board in April.
The lawsuits allege a web of entangled interests at Facebook and the covert dealings that allowed Mr. Zuckerberg to cement his control over the company. The board showed “stunning” disloyalty to shareholders in approving a plan that would diminish shareholders’ say, investors said in court documents, which were first reported by Bloomberg.