The Disaster of the Facebook IPO

[LouiseJane]

As if the Facebook IPO wasn’t bad enough, investors have filed a lawsuit in U.S. District Court for the Southern District of New York in Manhattan against Facebook, Mark Zuckerberg, Morgan Stanley and other underwriters, alleging that high profile bank clients received privileged information that was not disclosed to the public prior to the offering.

Massachusetts Secretary of the Commonwealth William Galvin has issued a subpoena to Morgan Stanley requesting information regarding its contact with those clients prior to the IPO. Galvin said, “We need to be assured that everyone, every investor, gets treated the same.”

According to CNN, the lawsuit alleges that executives at Facebook told the underwriters to lower revenue projections for the company, which the banks then shared with major clients, but not the public, a probable violation of federal securities law.

According to Reuters, JPMorgan, Bank of America, Goldman Sachs and lead underwriter Morgan Stanley all changed their revenue projections regarding Facebook just before the IPO, however, there is still much that is unknown.

The Financial Industry Regulatory Authority said “Until we unwind the facts and circumstances surrounding this situations, it is inappropriate to speculate about what potential violations may have occurred.”

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[OrientalStudent]

Just to add on with something interesting, Marketingland.com reports that the botched Facebook IPO is also having a negative effect on the site’s regular users.

"After surveying more than a thousand U.S. adults between May 31 and June 4, the survey found that 44 percent of Facebook users said the company’s IPO made them view Facebook less favorably."

"The Reuters/Ipsos survey also found that about four out of five Facebook users say they’ve never bought a product or service based on ads/comments that they’ve seen on Facebook."

Source - marketingland.com/

---------- Post added at 07:48 PM ---------- Previous post was at 07:47 PM ----------

What do you guys think about the Facebook IPO? Do you have any vested interest in Facebook and has the recent events affected you?

[albert001]

Social network's shares continue to fall, but executives in California's technology hub say tech boom will continue Recriminations over Facebook's stock offering may be rattling Wall Street, but Silicon Valley considers the flotation a ruthless and successful smash-and-grab raid.
Entrepreneurs and executives in California's technology hub shrugged off controversy over Facebook's IPO and said the region's tech boom was solid and would continue.
But this is isn't a view shared outside the Valley, where experts warned that the debacle is likely to close the window for other tech firms considering share sales.
It is too early yet to judge whether Facebook will be a stock market success, but it has got off to an inauspicious start. The social media giant's shares tumbled 8.9% on Tuesday, scrubbing $8.3bn in market value. Since its initial price of $38 last Friday, shares have fallen to $31, reducing the company's value from $104bn to $85bn.
Financial regulators are investigating whether banks in charge of the IPO broke rules on the floatation's eve by selectively releasing negative news about Facebook to big investors but not the general public.
Other companies in Silicon Valley said if Mark Zuckerberg and his executives were guilty of anything it was shrewdly calculated greed, not overreach, and that the rest of the tech industry did not feel chastened.
Vasudev Bhandarkar, a CEO and board member of several companies,
including GlobalLogic, a research and development outfit, said
Facebook did not want to leave any money on the table. "It's not
hubris, it's ruthlessness. They did the best for themselves and ended
up screwing investors. Mark Zuckerberg has been very single-minded
about the valuation of his company."
Steve Blank, a start-up entrepreneur who teaches at Stanford University, said: "They twisted the arms of their bankers and sucked dry the maximum amount of money they could. They went home laughing. Should they have done that? Probably not. But if they can deliver profits all will be forgiven."
Blank expected five to 10 more Silicon Valley companies to seek listings within the next 12 months.