What happen to Facebooks IPO (initial public offering) Yes, there was plenty of agency conflict for Facebook. Prior to that time Facebook had spoken with J.P. Morgan about a projected 5% decrease in mobile advertising revenue for the 2nd quarter than the banks earlier estimates. As Facebook was concerned about its IPO, General Motors announced that the firm was getting out of the mobile Facebook advertising, due to its lack of effectiveness. This was a tall-tale sign of trouble. After being warned about Facebooks issues in the mobile advertising campaign, Morgan Stanley and other firms started advising clients to hold back their expectations. Morgan Stanley went ahead and decided that there was enough demand in Facebook to justify the price of $38.00 per share. And so on the day of IPO, they realized they did not have the demand in which was stated. Facebook was seeking ($38.00) * (420 million shares) = $15,960,000,000 ($15.9 billion) or ($16 billion) . Well the closing price on the day of IPO was $38.23 ($38.23) * (420 million shares) = $96.6 million raised at IPO. Since IPO the share price has fallen ever since, on the 2nd and 3rd trading days Facebook stock price was at $31.00 per share, investors loss ($38.00 - $31.00) = $7.00 per share ($7.00) *(420 million) = $2,940,000,000 (2.94 billion) dollar loss. The conflict is that investors claim that Facebook concealed investors of information during IPO marketing. Facebook shareholders state that research analysts at several underwriters had lowered their business forecasts for Facebook during the IPO process. FINRA and the Securities and Exchange Commission regulators are concerned about the incident and the Chairwoman of the SEC, Mary Shapiro states that the agency will investigate the issues regarding Facebooks IPO. What the regulators are concerned about is did Morgan Stanley share information to certain special clients. If this the claim, then investors / shareholders only have to prove that there were misstatements on the prospectus before the offering to have a case. Facebooks IPO was incorporated with a lot of issues that left investors very skeptical, including Nasdaq computer gliches that compounded the problems of the Facebook IPO. Now there is a stigma behind Facebooks IPO being a broken deal. Currently, regulators are looking into if analyst at Morgan or other underwriters warned some clients about Facebooks IPO launch. The funny part is that in Facebooks prospectus it states that the underwriter may sell more share than they are obligated to purchase also, in the underwriting agreement with Morgan Stanley it created a short-position. So, in essence Morgan Stanley made money on the decline of Facebooks IPO price by hedging their bets.
Posted on: Sat, 28 Jun 2014 18:03:06 +0000