Print 14 comment(s) - last by kleinma.. on May 29 at 1:34 PM

Facebook, NASDAQ, banks and underwriters associated with the IPO are all being sued

U.S. financial regulators are investigating claims by investors who say that they didn't receive all the correct information before buying Facebook's stock.

All seemed to be going well for Facebook, which had launched the largest initial public offering (IPO) of all time last week. The social network went public at $38 per share on Friday, and the company was valued at over $100 billion.

However, this IPO domination soon took a tumble only days after launch. On Monday, Facebook shares plunged 11 percent, and fell a total of 19 percent in a two-day span. According to Reuters, the company lost over $19 billion in market capitalization from the $38 per share offering price when it closed at $31 per share.

Now, Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are being sued by investors in Manhattan federal court who claim that they were lied to about Facebook revenue forecasts before purchasing stock. Other underwriters, like Bank of America Corp. and Barclays PLC, as well as Facebook executives, are being sued as well.

According to reports, underwriters had like Morgan Stanley had selectively shared Facebook estimates, leaving out certain details that would have possibly changed investors' minds. Morgan Stanley reportedly cut its revenue forecasts for Facebook only days before the IPO launched, yet failed to let investors in on the changes.

Banks named in the suit had also cut their estimates for Facebook for the full year 2012 and did not inform investors before the IPO.

"The underwriters took down their earnings estimates dramatically during the road show and only told a select group of investors," said Samuel Rudman, a lawyer for the plaintiffs.

This has led to an investigation from the U.S. Securities and Exchange Commission (SEC) as well as the Financial Industry Regulatory Authority (FINRA). The two will review the first day trading of Facebook shares.

"That's a matter of regulatory concern to us and I'm sure to the SEC," said Richard Ketchum, the Financial Industry Regulatory Authority's chairman and chief executive. "And without saying whether it's us or the SEC, we will collectively be focusing on it."

NASDAQ is also under the microscope in the Facebook stock fiasco. A Facebook investor sued NASDAQ yesterday in the same Manhattan federal court for mishandling trades in Facebook stock. This ultimately led to delays in customer orders. The investor is seeking class-action status for the suit and is representing all investors who lost money because their orders were not processed appropriately.

Source: Reuters

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People Are Stupid
By Ristogod on 5/23/2012 4:00:47 PM , Rating: 5
Who buys in on something that's already become as successful as it's ever going to be? Sure Facebook is big and in on everything, but they aren't ever going to go beyond what they are in terms of scale when you compare where they originated from and how fast they did it. There isn't much room for growth. So what does that leave?

RE: People Are Stupid
By Kaldor on 5/23/2012 4:01:46 PM , Rating: 5
A great man said this:

"You cant fix stupid"

RE: People Are Stupid
By bah12 on 5/23/2012 5:23:32 PM , Rating: 2
And that man's name....tator.

RE: People Are Stupid
By Camikazi on 5/23/2012 5:44:27 PM , Rating: 2
Tater Salad!

RE: People Are Stupid
By kleinma on 5/23/12, Rating: -1
RE: People Are Stupid
By FITCamaro on 5/23/2012 4:39:39 PM , Rating: 5
So $4 billion in revenue a year makes a company worth $100 billion? When it takes 25 years to make enough money to hit your supposed value, that's not right.

RE: People Are Stupid
By kleinma on 5/29/2012 1:34:25 PM , Rating: 2
Does Apple bring in its market cap value in revenue each year you idiot?

RE: People Are Stupid
By dark matter on 5/23/2012 6:00:02 PM , Rating: 2
If I had 900 million customers in my database, I'd expect to make more than a billion dollars.

That's just over a dollar a customer.

You'd be better of selling lemonade.

FYI, the IPO values each user (assuming they are completely legit, and not bots...) at over $100 each.

Sooooo, in a hundred years, you should break even. Right?

RE: People Are Stupid
By Trisped on 5/23/2012 8:19:14 PM , Rating: 2
It is a website similar to GeoCities and MySpace, but with more features. We all know what happened to those sites.

Not to mention the fact that Facebook has admitted to lower profits on mobile devices. I would not be surprised if most Facebook users in the US use a mobile device more then a computer to interact with Facebook.

Facebook has potential to grow, though the forecast does not look good.

RE: People Are Stupid
By MrBlastman on 5/24/2012 11:49:33 AM , Rating: 2
Exactly! It is Geocities but with a dumbed down, plug and play UI attached to it instead of forcing you to write your own HTML--well, and linking between sites.

I predict that FB will start charging users a small monthly usage fee at some point. Now that they are public, SuckerBerg will learn all about the pressure that gets put on CEOs from shareholders. They want to see dollar signs.

Once they start charging users... we'll see a mass exodus to the next big thing. Out of those 900 million users, I bet a TON of them won't want to pay a fee. Free is king on sites like this. The thing is, free doesn't sit well with the stock market.

RE: People Are Stupid
By DiscoWade on 5/23/2012 5:11:13 PM , Rating: 2
The Facebook IPO reminded me of the PS3 launch. I had a friend who bought several PS3's on the day it launched to sell it on eBay because those who did so with the PS2 made a lot of money. But the only problem with that strategy is that far too many other people did the same thing. Eventually my friend had to unload most of his PS3's at a loss.

It seems to me that many of the early investors of Facebook only bought the stock to sell. If everybody is selling then nobody is buying and the price drops.

RE: People Are Stupid
By Trisped on 5/23/2012 8:24:21 PM , Rating: 2
Yeah, I thought the original $28 per share was a little high for the company. At $38 a share they were way over priced.

There were probably a number of investors hopping that the value would go up just after the IPO, where they could turn there investment around and make a quick profit. Most of those investors probably bought the stock on margin, so when the stock price dropped it was sold off (probably automatically) at a major loss to the investor. Now the investors are suing the banks because their get rich quick scheme back fired.

RE: People Are Stupid
By JediJeb on 5/24/2012 6:01:01 PM , Rating: 2
I really like how they call someone who buys a stock today and sells it again today or tomorrow an "Investor". They are nothing more than gamblers who sit at the stock exchange or on a computer and roll stocks instead of dice. I guess if I ever go to Vegas and lose at the tables I should sue the casinos and the travel agents because I did not win big yet their brochures show all these happy people with money in their hands.

You invest in something because you believe in that company and want to help it grow, if you are in it only to make some quick cash then you are just a trader, plain and simple.

DejaVu again
By rogue_mouser on 5/24/2012 2:46:06 PM , Rating: 2
Isn't that list of banks who are being investigated pretty much identical to the list of banks that made billions on a government bailout after writing billions of dollars on bad mortgages? And are they any more likely to be held accountable now than they were then?

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007

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