The Disaster of the Facebook IPO
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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