FB shares tank, watchdogs sniff at Morgan Stanley
Shares of social networking Website Facebook have been in a freefall ever since its highly publicised IPO last Friday, and a blame game of sorts has begun with fingers being pointed at the deal’s main underwriters, Morgan Stanley Bank, and the company itself.
Facebook might have overestimated investor demand and put on the market 25% more shares than planned, according to a report in the Wall Street Journal.Also, Morgan Stanley reportedly told some clients just before the IPO that they did not expect ad revenues to keep up with the expansion of Facebook’s growing user base.
The US Securities and Exchange Commission head Mary Schapiro said on Tuesday the commission will be examining issues around Facebook IPO.
Valued at $104 billion on Friday, at $38 a share, Facebook is now worth around $84 billion.
The Journal reported on Wednesday that Facebook CFO David Ebersman overestimated the demand and decided to sell 25% more shares than planned, in consultation with the lead executive for the deal at Morgan Stanley, Michael Grimes.
The Journal said both men declined to comment.
Ebersman is being held solely responsible; CEO Mark Zuckerberg had given him lead responsibility and COO Sheryl Sandberg had recused herself citing friendship with Grimes.
Also, Reuters reported on Tuesday analysts at the deal's underwriters, Morgan Stanley and Goldman Sachs, had told their clients they were reducing their earning estimates for Facebook.
This is neither unusual, the banks have claimed, nor illegal. But Facebook stocks suffered because of it, reportedly.
Regulators have said they would investigate if the banks were selective in sharing this information with clients.