Morgan Stanley (MS) defended its role in Facebook Inc. (FB)’s initial public offering after a Massachusetts regulator subpoenaed the bank over talks between an analyst and investors about the social media company’s revenue outlook.
“Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs,” Pen Pendleton, a spokesman for the New York-based investment bank, said today in an e-mailed statement. “These procedures are in compliance with all applicable regulations.”
The question is twofold — whether there was a breach of the “Chinese wall” that is supposed to exist between the research department and syndicate folks and secondly whether there was material research information provided to certain people but not others.
Whether the latter is actionable is somewhat tricky. An IPO has a “quiet period” where the firm and those involved in the offering are not supposed to be making public statements except through the registration documents. But Facebook filed an amendment to the S1 in which some changes were made.
I suspect there will be a load of fun around this event, given the poor performance of the IPO and the technical matters surrounding its trade, especially late confirms and similar problems. This, incidentally, also appears to have led to people being short when that’s supposed to be impossible until the first trades settle (you can’t short without a borrow, and you can’t borrow shares that aren’t yet in the hands of anyone.)
At least that’s the theory; there are myriad reports that institutional clients and hedge funds are short and able to be short. Hmmmm… how do you short something you can’t get a locate on as of yet because the first trades in the public market haven’t settled? That’s a question we ought to get answered as well.
This whole process stinks. I’d love to just simply stick up the “I told you so” banner and call it a day, but this entire mess outlines a few important facts, with the most-important being that Wall Street never gives a damn about you, the individual investor. The entire purpose of selling something is of course to make a profit, and in this case they sure did — they maximized the amount the selling shareholders got, and the common man — indeed, anyone who bought the IPO — got the bag.
Have you figured it out yet America? What are you doing in this market, eh? Exactly how many times do you need to hear the touts tell you how “cheap” stocks are or how “investing” is something you should do — and lose money — before you wake the hell up?
If this isn’t an object lesson up and down the line, from the apparent shorting of stock that doesn’t exist in the public’s hands yet to screwed up executions so nobody knew what they had to “late” updates to material information on the company’s prospects to more, I don’t know how much more clear it needs to be.
Don’t worry, you only lost 26% in two and a half days if you bought at the open, or about 19% if you were lucky (dumb) enough to get an allocation.
That ought to make your whole year look good, right?