“There is no debating this is a misadventure of epic proportion.” – Max Wolff, an economist and senior analyst with Greencrest Capital.
Earlier, we reported that the analysts at Facebook’s IPO underwriters had cut their estimates for the company in the middle of the IPO roadshow, a highly unusual and negative event. What we didn’t know was why. Now we know.The analysts cut their estimates because a Facebook executive who knew the business was weak told them to. – Here’s The Inside Story Of What Happened On The Facebook IPO, Henry Blodget
FACEBOOK WAS WEAK, but only an elite few were given the information and now Morgan Stanley, JP Morgan and Goldman Sachs are on the grill.
The SEC and FINRA are investigating.
According to reports, including the one above from CBS “This Morning,” the cutthroat three sliced Facebook’s revenue projections days before the IPO, but only shared the information with “a select few” of their chosen clique. Then Morgan Stanley increased the Facebook offering price and the size of the deal, signaling greater demand at a higher price that actually existed among institutional analysts.
No “first day pop,” part of the lure that entices buyers to jump in on a Hollywood-esque IPO like Facebook, as Henry Blodget told Charlie Rose this morning, led to a big sell-off and the subsequent drop. Blodget was banned from trading for life after utilizing “false research,” a story that made all the headlines years ago. His articles are must reads on the subject.
“In compliance with all applicable regulations” were the weasel words used by Morgan Stanley.
Facebook stock was down 18% in three days, with two investors filing lawsuits because of the fishy circumstances that have surfaced since the Facebook IPO imploded.
The Facebook IPO is being seen as yet another Wall Street betrayal, where the elite 1% screw everybody else, because regular investors don’t have the access to details that inform the gambling they’re doing, while insider type information protects the Wall Street elite.