WORLD
Regulators, investors turn up heat over Facebook IPO
Baku, May 23 (AZERTAC). Two top U.S. financial regulators said on Tuesday the issues around the initial public offering of Facebook should be reviewed, putting fresh pressure on the company, its lead underwriter, Morgan Stanley, and the Nasdaq stock exchange. Facebook shares closed 8.9 percent lower at $31, following an 11 percent plunge on Monday. At that price the company has shed more than $19 billion in market capitalization from its $38-per-share offering price last week.
Reuters reported late Monday that the consumer Internet analyst at lead underwriter Morgan Stanley cut his revenue forecasts for Facebook in the days before the offering, information that was not disclosed to the market before the stock was listed. Facebook itself had urged analysts working for some of the 33 underwriters to lower their estimates ahead of the IPO, according to four sources with direct knowledge of the conversations that were held during the week prior to the IPO. The company had issued a revised prospectus on May 9 in which it cautioned about the possible negative impact of Facebook users shifting to mobile platforms, but the vague language fell well short of an explicit warning of lower revenues or earnings. Facebook has yet to make much revenue from mobile advertising. Many smaller investors who bought Facebook shares in the IPO were left in the dark. A Facebook spokesman declined to comment. "Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs," Morgan Stanley spokesman Pen Pendleton said in a statement.
Some big investors, though, protected themselves well. In a securities filing on Tuesday, Microsoft disclosed that it had sold 6.5 million shares at $37.58, meaning the software giant covered the cost of its original investment of 32.8 million shares for just $240 million in 2007, while still retaining most of the stake.
Besides the pressure on Facebook and on Morgan Stanley, there is also an intense focus on Nasdaq OMX Group Inc, which has shouldered much of the blame for the trading failures that market participants believe contributed to the weak performance of Facebook shares on its debut on Friday. "While clearly we had mistakes in the Facebook listing, we still want to highlight the fact that it was the largest IPO ever and on Friday of last week, we processed over 570 million shares," Nasdaq Chief Executive Bob Greifeld said at the shareholder meeting.