The Financial Industry Regulatory Authority chairman told Reuters that regulators are planning to review the allegations that Facebook’s own underwriter: Morgan Stanley shared negative news with big investors. “The allegations, if true, are a matter of regulatory concern” to FINRA and SEC, Ketchum told Reuters.
SEC Chairman Mary Schapiro, speaking to reporters 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.”
This resulted in social giant’s stock continued to lower further on its third day as a public company. The stock last closed at $31.00, down by 3.03 (-8.90%). The whole IPO is a blockbuster one as it raised a record-setting $16 billion, but although struck with multiple issues.
Furthermore, mere on the condition, social giant decided to tell analysts to cut estimates due to feedback during the investor roadshow which revealed users were opting for mobile devices. Citing a “person” at underwriter familiar, “Facebook backed off and said, ‘Hey get your models down.’”
“Facebook changed the numbers–they didn’t forecast their business right and they changed their numbers and told analysts,” said another source at one of the underwriters. “The analyst’s underwriters then all changed their numbers based on what management was telling them.”
“In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO,” the Morgan Stanley statement said.