Facebook IPO Status: It’s Complicated
JPMorgan’s (NYSE:JPM) CEO Jamie Dimon must be thanking his lucky stars for the Facebook (NASDAQ:FB) debacle. All of the market’s attention has been shifted from Dimon’s multi-billion trading loss to Facebook’s botched initial public offering. While many may have thought that investors who were fortunate enough to purchase Facebook shares at its $38 IPO price would be sitting on large gains by now, the complete opposite is true. In fact, it appears that lawyers will be the biggest winners of the Facebook drama.
Due to technical problems on the Nasdaq (NASDAQ:QQQ), Facebook’s market debut and trade confirmations were delayed last week. Some retail investors even claimed they did not receive trade confirmations until after the closing bell on the first day of trading. As a result, the exchange has officially been sued by an investor who claimed Nasdaq was negligent in handling orders of Facebook shares. Reuters reports, “Phillip Goldberg, a Maryland resident, is seeking class-action status on behalf of all investors who lost money because Nasdaq (NASDAQ:NDAQ) delayed or otherwise mishandled their buy, sell or cancellation orders for Facebook stock on May 18, the day the social networking giant went public.” Goldberg filed his lawsuit in the U.S. District Court in Manhattan.
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On Tuesday, Nasdaq’s CEO Bob Greifeld said in a shareholder meeting that the exchange clearly had mistakes with the listing of Facebook. He even attempted to place a positive spin on the situation by highlighting that Facebook was the largest IPO in history and the exchange processed over 570 million shares on its debut last Friday. However, according to the WSJ, a senior Nasdaq Stock Market executive told customers that it would not have gone through with the IPO had it known the scale of its technical problems.
Although JPMorgan and Goldman Sachs (NYSE:GS) were underwriters for Facebook’s IPO, Morgan Stanley (NYSE:MS) was the lead underwriter in the deal and is now being poked by lawyers and regulators. Massachusetts Secretary of Commonwealth William Galvin has issued a subpoena to the bank. “The Securities Division has put out a subpoena to Morgan Stanley in connection with the analyst’s discussion with certain institutional investors about the revenue prospects for Facebook,” a spokesman for Galvin’s office said. Reuters reported that shortly before Facebook’s IPO, Morgan Stanley told its big clients that the bank’s consumer Internet analyst, Scott Devitt, was significantly reducing his revenue forecasts for the social network.
Morgan Stanley maintains that it followed standard procedure and was in compliance with its handling of the Facebook deal. “After Facebook released a revised S-1 filing on May 9 providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS’s institutional and retail investors and the amendment was widely publicized in the press at the time,” the bank said in a statement to CNBC. However, the allegations caught the attention of the Financial Industry Regulatory Authority and the Securities & Exchange Commission, as the two regulatory agencies will be reviewing the claims.
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