Wednesday, May 23, 2012

WALL STREET - The Facebook IPO Fiasco

"Facebook I.P.O. Raises Regulatory Concerns" by EVELYN M. RUSLI and MICHAEL J. DE LA MERCED, New York Times 5/22/2012

Excerpt

Just days before Facebook went public, some big investors grew nervous about the company’s prospects.

After publicly warning about challenges in mobile advertising, Facebook executives held conference calls to update their banks’ analysts on the business. Analysts at Morgan Stanley and other firms soon started advising clients to dial back their expectations. One prospective buyer was told that second-quarter revenue could be 5 percent lower than the bank’s earlier estimates.

As investors tried to digest the developments, Morgan Stanley was busy setting the price and the size of the stock offering. While some big institutions scaled back on their plans, others placed large orders. And retail investors clamored for shares.

In the end, Facebook and the Morgan Stanley bankers decided they had enough demand and interest for Facebook to justify an offering price of $38 a share.

They didn’t.

When Facebook went public on Friday, its shares barely budged — and they have been falling ever since. On Tuesday, the stock closed at $31, more than 18 percent below its offering price.

The I.P.O. of Facebook was supposed to be Morgan Stanley’s crowning achievement, but it is turning out to be a big embarrassment, raising broader questions from regulators about the I.P.O. process.

Over the last year, Morgan helped usher in a new generation of technology companies, leading the offerings of LinkedIn, Groupon, Pandora and more than a dozen other start-ups. Facebook was poised to be the biggest and most ambitious. When the dust settles, Morgan Stanley could make more than $100 million in fees on the I.P.O.

But rival bankers and big investors have complained that Morgan Stanley botched the debut. They contend that the bank set the price too high and sold too many shares to the public. Facebook’s management team is also shouldering some blame. David Ebersman, the company’s chief financial officer, spent more than a year orchestrating the stock offering, drafting the prospectus and meeting with investors long before the company picked its bankers.


"Facebook's 'Botched' IPO: What Went Wrong and Why?"
PBS Newshour 5/23/2012


COMMENT: Do you wonder if Wall Street has learned ANYTHING from our nation's recent economic crash (and 'crash' is an applicable term)? I don't think so.

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