updated 06:27 am EDT, Wed May 23, 2012
Morgan Stanley allegedly warns investors on Facebook revenue estimates
The Facebook initial public offering (IPO) may have been hampered by the bank that brought the social network to Wall Street. The LA Times writes, Morgan Stanley was advising favored clients on reduced revenue estimates for Facebook, leading Wall Street insiders to avoid or drop shares. The US Securities and Exchange Commission will be looking into the Facebook IPO, with the Financial Industrial Regulatory Authority also expressing concern, particularly as this resulted in non-institutional investors with more shares than they had intended. With Facebook shares expected to be scarce, some investors over-ordered in the belief that they might miss out if they didn't, leaving them more exposed than they had planned.
The lower estimates by Morgan Stanley were apparently made following a public filing about mobile advertising sales, of which institutional investors were warned of during a Facebook IPO roadshow. The bank has received subpoenas from Massachusetts securities regulators over the issues, with the allegations suggesting possible securities fraud as this information was not revealed to all potential investors.
Further, stock market Nasdaq also came under fire for technical issues, including a two hour delay on the first day of trading and confirmation glitches. Maryland investor Phillip Goldberg has sued Nasdaq in a New York federal court for failure to execute trades in a timely fashion to the traders cost, with a view to make it a class-action suit.
SEC Chairperson Mary Schapiro, advising on the agency's need to look into the IPO, said "I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook."