That's the question lawyers, regulators and other observers are asking as allegations swirl that major clients of Morgan Stanley (MS, Fortune 500) and other banks involved in the offering may have had access to privileged information ahead of the stock's debut.
Law enforcement officials have not accused either Facebook (FB) or the banks that underwrote its IPO of wrongdoing."We need to be assured that everyone, every investor, gets treated the same," William Galvin, the secretary of the Commonwealth of Massachusetts, told CNN Wednesday. Galvin has issued a subpoena to Morgan Stanley seeking information about the bank's contacts with clients ahead ofFacebook's IPO last week.
On Wednesday, however, lawyers representing investors who purchased Facebook stock filed suit against the tech giant and the banks involved alleging that they withheld information that should have been disclosed in public documents.
The suit claims that Facebook executives told the underwriter banks to lower their revenue projections for the company, and that the banks relayed this information to favored clients but not to the general public.
If true, this would likely be in violation of federal securities law, which dictates that all "material information" -- facts that could influence investor decisions -- be disclosed by public companies and companies planning to go public in their filings with the Securities and Exchange Commission.
Documentation to support this claim is not provided in the lawsuit, though Darren Robbins, a lawyer for the plaintiffs, said his team had access to "witnesses and shareholders and other sources of information."
Morgan Stanley, JPMorgan (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and Goldman Sachs (GS, Fortune 500) did indeed revise their revenue projections for Facebook shortly before its IPO,according to Reuters, though these revisions came after Facebook filed amended documents with the SEC. The company had previously disclosed its difficulties generating revenue from users on mobile devices, and in a May 9 filing, it said these problems had continued.
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Within the next two days, Reuters said, the four banks' research departments lowered their estimates. Those estimates were later communicated to major investors but not the general public.
Underwriters -- the banks that handle an IPO -- have close contact with a company before it goes public, though they are subject to restrictions on what can be shared between their research divisions and bankers working directly on the IPO. This is in order to prevent conflicts of interest that could lead to misleading research.
And shame on me , I actually filled out the form to grab some of this fakeness but had reservations because the IPO was still , one day before scheduled opening , was being " decided " , so i trashed it and put a few more shares of something I already have , and is promising on the books. Thank you Arizona for passing " that law " , Iv'e been holding stock in a special company for several years waiting for you to do it , smooches oxoxoxoxox
Seems more like what I remember of the dot com issue , I mean seriously it does. And this is the first week.
Facebook must raise there net worth 47% in the first year , or they will be kaput. That is INSANE !!!!!!!!!!!
You watch , you'll see that it won't take any longer then it did for politicians to claim in so many words , that facebook is too big to fail , then it takes the US government to bail out facebook within 18-24 months.
And why did GM ( general motors ) just make statement that they are leaving facebook , and will no longer be advertising ? Because thats what facebook is really all about when it comes to investments, it's advertising worth. When you can reach 900 million people worldwide , daily .
Lets not forget that the long standing bill that was passed I believe around 1948 , and renewed again some time around the late 70's , that government cannot use propaganda on US citizens ., guess what , yes , it was just this week retracted off the books.
Anyone figuring this out yet ? Or am I lost.