Social notworking site Facebook and dozens of banks must face a lawsuit accusing the social media company of misleading investors about its health before its $16 billion initial public offering.
According to Reuters, US District Judge Robert Sweet in Manhattan threw out attempts by Facebook and the banks to have the case dismissed.
He said investors could pursue claims that Facebook should have disclosed internal projections on how increased mobile usage and product decisions might reduce future cash.
Sweet wrote in his 83-page decision that the company's risk warnings misleadingly claimed that mobile revenue cuts were possible when, in fact, they had already materialised and were causing a headache for the outfit.
Facebook told Reuters that it continued to believe the suit lacked merit and would contest it.
Investors including pension funds in Arkansas, California and North Carolina are seeking damages resulting from their having sold or holding onto the shares as they fell below the IPO price, bottoming at $17.55 on September 4, 2012.
More than 40 defendants were sued, including Facebook Chief Executive Mark Zuckerberg, Chief Operating Officer Sheryl Sandberg, lead underwriter Morgan Stanley, Goldman Sachs Group and JPMorgan.
Court papers show the defendants insisting that Facebook had no obligation to make the requested disclosures.