Did These Banks Profit From Facebook’s IPO?
Morgan Stanley (NYSE:MS) and other underwriters for Facebook’s (NASDAQ:FB) initial public offering have made a profit of about $100 million on stabilizing the price of the new stock since trading began on Friday, according to the Wall Street Journal. This is in addition to the underwriting fees of approximately $176 million, which the investment banks, which also include Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM), received for conducting the IPO.
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Morgan Stanley, the main underwriter, will receive a majority of these profits, as well more than $100 million in fees on the IPO. It was also the stabilization agent for the IPO, staying in charge of about 63 million shares to help support Facebook’s share price. There had been speculation that underwriting banks were buying shares of the social network to prevent the stock from falling below the offering price of $38 on the opening day.
The news of additional profits will not be taken well by investors, a group of whom has sued the banks as well as Facebook for withholding information that could’ve affected buying and selling decisions. However, some of the gains are expected to be offset by losses associated with reimbursing those investors who may have lost money after Nasdaq faced technical issues on Facebook’s first day of trading, WSJ said. Nasdaq is currently investigating those claims.
The IPO is also being investigated by the Financial Industry Regulatory Authority, Wall Street’s self-regulator, as well as the Securities and Exchange Commission.