U.S. Regulators Investigate the Facebook IPO Case: Two major U.S. financial regulators have said Tuesday that issues the Initial Public Offering (IPO) of Facebook should be revised. Regulators want to pay special attention to the role of Morgan Stanley, an organization that was responsible for the management of the initial public offering of Facebook.
Facebook shares closed at least 8.9 percent, to $ 31 (24.5 euros), after a fall from 11 percent last Monday. At that price, the company has lost more than 19,000 million dollars in market capitalization over the asking price, $ 38 (30.04 euros).
Reuters reported on Monday that an analyst at Morgan Stanley, a financial institution that advised and helped to Facebook in its IPO, report reduced their revenue forecasts for the days before Facebook offer. Despite the importance of this forecast, the information was not disclosed to the market before the shares were thrown at.
“Facebook changed the numbers. They correctly predicted their business, changed their numbers and they told analysts,” he assured another source of insurance companies with knowledge of the situation.
The company had posted a revised brochure on 9 May in which he warned about the possible negative impact of Facebook users on mobile platforms, but the vagueness of the language was far short of an explicit warning of lower earnings or profits. Facebook has yet to make many mobile advertising revenue. A Facebook spokesman declined to comment.
“Morgan Stanley follows the same procedures for Facebook offer tracking for all IPOs,” said Morgan Stanley spokesman, Pen Pendleton, in a statement. “These procedures are in compliance with all applicable regulations.”
REACTION OF REGULATORS: The new estimates show a reduction in revenue and earnings projections for both the second quarter of 2012 and for the full year, according to detailed figures reviewed by Reuters. The issue of selective disclosure drew the attention of U.S. primary regulator.
“That is a matter of regulatory concern for us and I am sure for the SEC,” said Richard Ketchum, chairman of the Regulatory Authority Financial Industry and CEO. “And without saying if it’s us or the SEC, we focus on it.”
The chairman of the SEC, Mary Schapiro said that investors should have confidence in the investment, but admitted that he had questions that needed answering. “I think there are plenty of reasons to have confidence in our markets and the integrity of its operation but there are issues we need to look specifically about Facebook”, he told reporters.
The state of Massachusetts has also confirmed it would examine the issues. The Secretary of the Commonwealth William Galvin has issued a subpoena to Morgan Stanley in relation to the proceedings of the analyst with investors on Facebook.