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Entries in IPO (43)

Monday
Dec172012

Morgan Stanley Fined for Role in Facebook IPO

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley is the first major financial entity to be sanctioned in relation to Facebook's IPO.

Massachusetts officials are fining Morgan Stanley $5 million for not disclosing a revenue shortfall with the public ahead of the social network's troubled IPO in May.

Massachusetts' secretary of the commonwealth, William F. Galvin, accused the bank of coaching Facebook in how to share information with analysts, putting ordinary investors without access to such information at a disadvantage, according to DealBook, a financial news site published by the New York Times.

According to DealBook, Morgan Stanley has neither denied nor admitted guilt in the case.

Copyright 2012 ABC News Radio

Wednesday
Jun272012

Facebook Gets Tepid Welcome on Wall Street

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Wall Street analysts gave Facebook a lukewarm reception on the first day they were allowed to publicly issue their views of the company's stock.

Nearly six weeks after Facebook's flop of an IPO, at least 17 firms revealed a mostly tepid assessment of the social-network giant's shares Wednesday.

On average, analysts at the banks behind the IPO estimated the value of Facebook shares to be just under their $38 debut. Goldman Sachs valued the shares at $42, while analysts at JP Morgan Chase recommended a target of $45.

But those endorsements did little to lure investors on a day when the U.S. stock market ticked upward as a whole. Facebook stock fell to $32.23 Wednesday, down about three percent from Tuesday. The shares had fallen more than 30 percent to $25 shortly after their debut though they have regained some of that ground.

The lowest estimate, $25, came from Daniel Salmon, a research analyst at BMO Capital, who cited concerns about the pace of the social network's user growth. That was about how much shares sold for at their ebb in early June, though they hit $42 just hours after the May 18 IPO.

Analysts at Facebook's main underwriter, Morgan Stanley, recommended the same price Wall Street fixed for the shares when they first started selling, arguing in a report released Wednesday that the network's mobile transition will reap benefits in the long run.

"We view Facebook as a valuable long-term asset that has been penalized by a negative perception of its ability to navigate a transition to mobile usage," Morgan Stanley analysts wrote in the 90-page report. "We view Facebook's mobile transition as a near-term headwind but long-term opportunity, and investors that believe in Facebook's ability to execute over the next several years may be rewarded when the mobile monetization … narrows or closes."

Copyright 2012 ABC News Radio

Wednesday
Jun062012

Nasdaq Outlines $40M Fund for Facebook IPO Glitches

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- The Nasdaq stock exchange announced a $40 million fund Wednesday to compensate investors who were “disadvantaged” by technical problems during Facebook’s rocky IPO on May 18.

The Nasdaq OMX Group board said an accommodation program will pay qualifying member firms with cash or in trading discounts in a step to re-build its reputation after a technical glitch confused investors about their trading orders.

The IPO orders that qualify for the program are those that were “directly disadvantaged due to a clear error on the part of Nasdaq” and the member had specific “uncertainty” regarding their order. No orders entered after 11:30 a.m. will be considered as part of the review process.

“I would also like to make clear that this is a member firm accommodation policy because we have only the relationship with our member firms, not with brokers or investors or people who are customers of our member firms,” said Eric Noll, a Nasdaq executive, in a video outlining the plan. “We are only in a position really to discuss accommodations to those member firms, not beyond that.”

A spokesman for Nasdaq declined to comment on how this fund will affect retail investors who are customers of the member firms.

Nasdaq said three types of transactions would qualify for the program: sell orders at or below $42 that did not execute, sell orders at $42 or less that executed at an inferior price and buy orders at $42 that were executed but not immediately confirmed.

Facebook’s IPO has been one of the worst-performing in decades. The shares are down 33 percent from their first-day closing price to a low of $26.

Copyright 2012 ABC News Radio

Tuesday
May292012

Facebook Shares Hit New Low

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Facebook shares fell 7 percent to below $30 on Tuesday, the lowest since the initial offering, as options trading on the stock began.

The social network has been the worst-performing large IPO in at least a decade, falling more than 20 percent. The shares fell $2.49 to $29.43 in Nasdaq trading at 12:51 p.m. Tuesday. They opened at $38 in their May 18 debut and briefly touched $45.

Investors are sour on Facebook’s prospects, the options trading indicates. An option gives an investor the right to buy or sell a share of stock sometime in the future for a price that’s set today. The volume of “put” options exceeded “call” options by 1.3-to-1, according to data compiled by Bloomberg.

The most widely-sold option bets that the price of Facebook shares will fall to $25 by mid-July.

Facebook is the subject of lawsuits and at least one government probe over its IPO and the news that some big investors were tipped off by analysts that the company’s results would be disappointing.

Copyright 2012 ABC News Radio

Tuesday
May292012

Facebook's Mark Zuckerberg Spotted in Rome

Justin Sullivan/Getty Images(ROME) -- Where do two newlyweds worth almost $20 billion spend their honeymoon? Rome, apparently.

Facebook founder Mark Zuckerberg and new bride Priscilla Chan were recently spotted in the Eternal City enjoying a romantic dinner for two at Pier Luigi, where they dined on oyster and lobster pasta. The couple also reportedly hit numerous tourist spots.

Ironically, the honeymoon images surfaced on Twitter, not Facebook.

Longtime sweethearts Zuckerberg and Chan married the weekend following Facebook’s May 17 initial public offering,  in a backyard ceremony that also celebrated Chan’s medical school graduation.

Unfortunately, the honeymoon for the Facebook IPO, one of the most highly anticipated of all time, might be over. Its share price has tumbled, and lawsuits are building amid accusations that banks gave select investors inside information about the company’s potential profitability. And Zuckerberg’s net worth has taken a significant hit, too.

Copyright 2012 ABC News Radio

Friday
May252012

Morgan Stanley to Pay Back Investors over Facebook IPO?

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Morgan Stanley, the lead investment bank in the Facebook IPO, might pay money to some retail investors who overpaid when they bought the stock.

Published reports say the firm is reviewing orders from Morgan Stanley Smith Barney clients. 

Technical problems at the Nasdaq stock market caused delays and confusion about Facebook trading last week.  There have also been many questions, even lawsuits, over tip-offs received by Wall Street insiders about negative reports on Facebook’s future profits and revenues.

Copyright 2012 ABC News Radio

Thursday
May242012

Facebook Stock Jumps as Analysts Call for Better IPO Rules

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Facebook stock closed up for the second day in a row as Facebook's underwriters continued to face heat over whether they gave an unfair advantage to preferred clients. Many average investors lost thousands of dollars betting on Facebook's IPO.

A week after the company had the biggest tech IPO in U.S. history, Facebook stock closed up 3.2 percent to $33.03 on the NASDAQ Thursday.

Reports that large clients, such as mutual funds and wealthy investors, received a warning about Facebook's muted revenue prospects have attracted the attention of lawmakers and securities regulators.

Capital Research and Management, an investment firm based in Los Angeles, may be one of the preferred investors that received a warning from an underwriter about Facebook's lower-than-expected revenue days before the IPO, the Wall Street Journal reported.

"We, like other investment management firms, had access to publicly available information and we made an investment decision based on publicly available information," Chuck Freadhoff, a spokesman for Capital Research and Management, told ABC News.

Jim Krapfel, an IPO analyst with the investment firm Morningstar, said that activity may first sound "legal and common."

"Clearly, though, the rules need to be changed to put all investors on a more even playing field," Krapfel said.

Three investors filed a class-action lawsuit in a Manhattan federal court on Wednesday against Facebook's board and its underwriters, saying its filings with the Securities and Exchange Commission were "false and misleading." The Senate banking committee and the Securities and Exchange Commission said they are looking into the issues related to Facebook's IPO.

Jacob Zamansky, a securities attorney in New York who is not involved with that suit, said that it appears Morgan Stanley may have violated securities rules.

He said the underwriters' alleged actions fly in the face of a $1.4 billion settlement in 2003 with 10 banks. The settlement came after an investigation by Eliot Spitzer, then New York state's attorney general. That agreement settled charges of corruption against analysts after the so-called dotcom bubble burst and provided that issuers would follow "fair disclosure" rules and provide the same information to all clients.

Morgan Stanley has said the bank "followed the same procedures for the Facebook offering that it follows for all IPOs."

"After Facebook released a revised S-1 filing on May 9th providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS's institutional and retail investors and the amendment was widely publicized in the press at the time," Morgan Stanley said in a statement.

A spokesman for the New York Stock Exchange denied reports that Facebook was considering shifting from the NASDAQ after technical glitches delayed trading in Facebook stock last Friday by over 30 minutes.

"There have been no discussions with Facebook regarding switching their listing in light of the events of the last week, nor do we think a discussion along those lines would be appropriate at this time," NYSE spokesman Richard Adamonis told ABC News.

Copyright 2012 ABC News Radio

Wednesday
May232012

Facebook Sued, Subpoenaed About IPO

Zef Nikolla/Facebook(WASHINGTON) -- Facebook and its IPO underwriters are being sued and face pointed questions from lawmakers about whether they misled some investors before the largest initial public offering by a tech company in U.S. history.

Facebook investors have filed a class action lawsuit against the company and its underwriters, saying the registration statement and prospectus filed with the Securities and Exchange Commission ahead of the IPO were "false and misleading."

The class action lawsuit was filed on Wednesday in a New York District Court on behalf of Facebook stock purchasers against Facebook's board, including CEO Mark Zuckerberg and CFO David Ebersman, Morgan Stanley and the other underwriters.

The suit alleges that Facebook failed to disclose that the company told the lead underwriters to reduce their 2012 performance estimates because more users are using its mobile apps, which don't generate advertising revenue.

Facebook stock moved higher on Wednesday after two days of declines. Shares of the tech company are up about 2.5 percent to $31.76 in mid-day trading.

But while the company's stock sees a slight jump, regulators have directed pointed questions at the tech company after its muted IPO on Friday.

On Tuesday, there was a report that Morgan Stanley and Goldman Sachs -- investment bank underwriters supporting the IPO -- told clients earlier this month that they were reducing their earnings forecasts for Facebook.

The Senate Banking Committee is conducting staff briefings with Facebook, regulators and other stakeholders to learn more about issues raised in the news regarding Facebook's IPO, a committee aide told ABC News on Wednesday.

Facebook did not immediately respond to a request for comment.

Meanwhile, Massachusetts Secretary of State William Galvin has subpoenaed the tech company, investigating whether Morgan Stanley, the main IPO underwriter, told preferred investors that an analyst cut his revenue estimate based on the company's S-1 filing before the IPO.

"If it turns out you have a pattern of conduct where preferred investors are getting special treatment that's devastating to rebuilding confidence in the market," Galvin told ABC News.

His office issued a subpoena to Morgan Stanley that seeks information about discussions the bank had with certain clients about Facebook's IPO.

"It is so important that we not allow this situation to go uninvestigated," Galvin said. "Given the breadth and size of the issue and the losses that are out there it's important that we move rapidly."

Facebook stock lost nearly 20 percent of its value in its first three days of trading on the NASDAQ.

"So many investors have lost so rapidly so much," said Galvin. "We intend to move quickly. We need to get answers for average American investors."

A spokesman for Morgan Stanley provided a statement regarding some of the allegations put forward against the investment bank, saying it "followed the same procedures for the Facebook offering that it follows for all IPOs."

"After Facebook released a revised S-1 filing on May 9th providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS's institutional and retail investors and the amendment was widely publicized in the press at the time."

In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO. "

A spokeswoman for JP Morgan Chase declined to comment about the lawsuits.

Copyright 2012 ABC News Radio

Wednesday
May232012

Regulators to Review Morgan Stanley's Role in Facebook IPO

EMMANUEL DUNAND/AFP/GettyImages(NEW YORK) -- Since its debut on NASDAQ last Friday, Facebook's stock has been sliding, dropping from an initial public offering price of $38 to just under $32 by Tuesday's close.

Co-founder Mark Zuckerberg has already lost several billion dollars, considering he owns more than 500 million shares in the company.

Most felt that Facebook was widely overvalued at $38 share.  And now, a potential scandal is brewing as the Financial Industry Regulatory Authority might investigate reports that as bankers were building up the IPO to the public, they were privately lowering revenue forecasts and perhaps sharing their predictions with integral investors.

Massachusetts' Secretary of State William Galvin's office has issued a subpoena to Morgan Stanley that seeks information about discussions the bank had with certain clients about Facebook’s IPO.  Galvin wants to know if the bank secretly revealed to clients that its analysts had cut its revenue estimate for Facebook

"It is so important that we not allow this situation to go uninvestigated," Galvin told ABC News.  "Given the breadth and size of the issue and the losses that are out there it’s important that we move rapidly."

"So many investors have lost so rapidly so much," he added.  "We intend to move quickly.  We need to get answers for average American investors."

Meanwhile, one investor is considering a class action lawsuit against the NASDAQ for computer glitches last Friday that prevented many from purchasing Facebook stock.

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Copyright 2012 ABC News Radio

Tuesday
May222012

Facebook IPO: Lessons for Investors

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- With Facebook's stock down 11 percent at Monday's close, many retail investors who thought they were getting the hot ticket in town may soon be playing hot potato with their Facebook shares.

If there's one lesson to be learned from Facebook's IPO letdown, it's don't buy a stock based on emotion, said Bill Middleton, president of Sound Portfolio Advisors of Mystic, Conn.

Those excited investors who bought at $45 a share -- Facebook's high on Friday -- had a rude awakening when the stock opened on Monday below its offer price of $38, and closed at $34.03.

"This is one of those things built on hype, and they maximized the hype," Middleton said.

Nevertheless, hype is to be expected for a such a widely used consumer product.

"What people forget is that Google went down, too, not from the IPO, but down the first week," Middleton said.  "So, what you're seeing with Facebook is not completely uncommon.  This, though, is a different kettle of fish."

Google was priced at $85 a share at its IPO in 2004 -- 74.6 times its earnings, or price-to-earnings ratio.  Shares of the search engine and advertising behemoth, based in Mountain View, Calf., closed up 2.28 percent on Monday to $614.11 a share.

Facebook's IPO price of $38 a share was 100 times its earnings -- a high price-to-earnings ratio, even for an eight-year-old company, Middleton said.

"That's a difficult environment, with Microsoft at 10 times earnings," said Middleton.  "Exxon is at 10 times its earnings.  Even Apple is at 14 times."

Not only was last week a difficult environment for stocks -- one of the worst of the year -- but Facebook's IPO terms with its underwriters or investment bankers may have also created an unfavorable environment for retail investors.

"Usually, coming off the IPO price, the underwriters try to leave a little room for retail buyers to have a good experience," Middleton said.  "Here, Facebook squeezed the underwriters so hard that they squeezed every last penny they possibly could out of the offering price."

Copyright 2012 ABC News Radio







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