FINRA, SEC to Investigate First-Day Facebook Stock Problems
May 23, 2012 3:46 PM
comment(s) - last by
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
, 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.
This article is over a month old, voting and posting comments is disabled
RE: People Are Stupid
5/23/2012 5:23:32 PM
And that man's name....tator.
RE: People Are Stupid
5/23/2012 5:44:27 PM
"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer
Facebook IPO Exceeds $100 Billion Mark
May 15, 2012, 10:37 AM
Facebook to Go Public May 18
May 2, 2012, 1:47 PM
Facebook to Raise $10 Billion for 2012 IPO; Company Value Could Double HP's
November 29, 2011, 12:07 PM
Christian Bale Confirmed to Play Steve Jobs in Upcoming Film
October 23, 2014, 8:43 AM
Monica Lewinsky Speaks Out, Calls Herself "Patient-Zero" for Internet Cyberbullying
October 21, 2014, 2:25 PM
Google Fiber Finally Heading to Austin, Texas in December
October 16, 2014, 11:48 AM
Dropbox Flexes Security Muscle, Appears to Have Squashed Password Breach
October 15, 2014, 12:12 PM
U2’s Bono Apologizes for Forced “Songs of Innocence” Album Downloads
October 15, 2014, 7:55 AM
Google Launches "Same-day Delivery" Subscription Service for $95/year
October 14, 2014, 10:37 AM
Most Popular Articles
Cool Science Video of the Day: Carnivorous Leech Eats Giant Jungle Worm
October 16, 2014, 6:44 PM
Chinese Government Declares Digital War Against America's Top Tech Firms
October 20, 2014, 12:07 PM
PS4 "Masamune" Update 2.0 Will Bring New Music and Customization Features
October 17, 2014, 1:05 PM
HBO, CBS Lead Charge to Ditch Cable
October 16, 2014, 4:40 PM
Update: Motorola Droid Turbo Coming Oct 28, 48-hour Battery Life Confirmed
October 19, 2014, 9:19 PM
Latest Blog Posts
The Surface Mini That Was Never Released Gets "Hands On" Treatment
Sep 26, 2014, 8:22 AM
ISIS Imposes Ban on Teaching Evolution in Iraq
Sep 17, 2014, 5:22 PM
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information