Morgan Stanley: Facebook Wasn’t Our Fault

Morgan Stanley (NYSE:MS) worked “100 percent within the rules” and “speculation of nefarious activity” surrounding Facebook’s (NASDAQ:FB) initial public offering is untrue, the firm’s chief executive told employees in an internal statement, according to MarketWatch. James Gorman defended his firm’s role in the fiasco that was marred by technical troubles and questions on whether the stocks’ offering price had been needlessly inflated by the underwriting banks.

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Morgan Stanley was the lead underwriter for the much-watched IPO that was marred by trading glitches in the systems of the Nasdaq OMX Group (NASDAQ:NDAQ).

The underwriters are facing criticism over their roles in the offering, with a group of investors having filed a lawsuit alleging Facebook and its banks failed to properly disclose changes to analysts’ financial forecasts for the social network.

Gorman also said that he wasn’t “aware of any dissent” among Morgan Stanley and fellow underwriting firms Goldman Sachs (NYSE:GS) and JP Morgan Chase (NYSE:JPM) regarding Facebook’s IPO price of $38 a share. He also supported employees who worked on the offering, including Michael Grimes, co-head of the firm’s global technology banking, and Daniel Simkowitz, chairman of its global capital markets business.

The CEO added that the technical malfunctions caused “unprecedented confusion and disarray” among investors, and said that the fall in Facebook’s stock since had been “disappointing.” Since the May 18 IPO, Facebook shares have fallen almost 30 percent.

Gorman also said that Facebook’s chief operating officer, Sheryl Sandberg, had called him to praise the company for its work on the IPO and offered the firm a professional reference.

In a vote of confidence to Morgan Stanley and its fellow banks, Mary Meeker, a partner at Kleiner Perkins Caufield & Byers, said she does not blame the underwriters. Meeker said Facebook’s IPO was a “financial tsunami,” but added that most of the blame for the troubles could be put on the technical problems.

“We’ve never seen anything like it before,” she said. “Confidence and momentum in the market is so important.”

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