Facebook may face further scrutiny for reasons behind IPO fiasco

   Jun 2, 11:15 am

Washington, June 2 (ANI): The US Securities and Exchange Commission is believed to be examining the reasons behind Facebook's dismal stock performance, and how its underwriters and the NASDAQ stock market executed the company's IPO.

Federal regulators are said to be reviewing the public offering, but some Democrats in Congress have expressed their concerns whether the IPO violated any laws.

Although SEC officials haven't clarified whether the agency is conducting an investigation, but according to a report, there are three major questions swirling around the troubled IPO: what caused the technical glitches that disrupted Facebook's NASDAQ debut; whether Facebook gave privileged information to certain analysts and investors; and whether Morgan Stanley, the IPO's lead underwriter, gave conflicting messages to different kinds of investors before the offering.

However, for some in Congress, concerns may arise even more if federal regulators came up empty-handed.

"This IPO is a poster child for all that's wrong with current practices," the Washington Post quoted Sen. Richard Blumenthal, as saying.

Facebook stocks closed Friday at 27.72 dollars a share, which was down 27 percent from its May 18 debut price of 38 dollars.

Blumenthal pointed to questions about whether Facebook and Morgan Stanley selectively disclosed a big drop in the company's revenue forecast, which caused some big investors to back out of the offering.

"You wonder, isn't there something wrong with this picture? Where the underwriters selectively pick [who should receive] information, then the public is not only permitted but encouraged to participate?" he reasoned.

Like their Democratic counterparts, Republicans have also received briefings on the IPO from regulators, but chose to remain quiet over their concerns on the issue.

Facebook cannot publicly comment due to a mandatory 40-day quiet period after the IPO. However, Morgan Stanley suggested that some of the criticism were 'sour grapes' from poorly informed investors.

"People who thought they were buying this stock so they could get an enormous pop were both naive and ordered [shares] under the wrong pretenses. I'm confident that we followed exactly the procedures we follow," Morgan Stanley CEO James Gorman was reported, as saying. (ANI)

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