EXCLUSIVE: Here’s the Inside Story of What Happened on the Facebook IPO
Facebook CEO Mark Elliot Zuckerberg
Pat: Looks like Facebook may have engaged in some illegal hanky-panky, in their IPO . . .
May 22, 2012 | Business Insider |
And now for some more bombshell news about the FacebookIPO…
Earlier, we reported that the analysts at Facebook’s IPO underwriters had cut their estimates for the company in the middle of the IPO roadshow, a highly unusual and negative event.
What we didn’t know was why.
Now we know.
The analysts cut their estimates because a Facebook executive told them to, a source tells us.
The information about the estimate cut was then verbally conveyed to sophisticated institutional investors who were considering buying Facebook stock, but not to smaller investors.
The estimate cut appears to have influenced the investment decisions of at least some institutional investors, dampening their appetite for Facebook stock, and, crucially, affecting the price at which they were willing to buy Facebook stock.
As I described earlier, at best, this “selective disclosure” is grossly unfair to individual investors who bought Facebook stock on the IPO (or at any time since).
At worst, it’s a violation of securities laws.
This latest chapter in the Facebook IPO story began this morning, when Reuters’ Alistair Barr reported that the research analysts at the company’s lead underwriters–Morgan Stanley, Goldman Sachs, and JP Morgan–had cut their earnings estimates for Facebook during the company’s IPO roadshow. This was highly unusual, if not unprecedented (I’ve been in and around the tech IPO business for almost 20 years, and I’ve never heard of it happening.)
Analysts cutting estimates is generally regarded as significant negative news for stocks. This is especially the case when the analysts who cut their estimates are thought to be very close to a company–and, therefore, to have particularly good information.
(In the old days, before the implementation of Regulation Fair Disclosure, companies used to manage the market’s expectations by telling trusted analysts to change their estimates. Reg FD banned that practice.)
Photo: An investor who wasn’t told about Facebook’s estimate cut.
The fact that some potential Facebook investors were told of the analysts’ estimate cuts and others were not would seem to be a major “selective dissemination” issue.
It is inconceivable that a reasonable investor would consider the sudden reduction of analysts’ estimates to be immaterial to an investment decision–especially if they analysts had privileged access to the company.
The SEC and FINRA appear to have acknowledged this, and they may now investigate what happened.
read more:
SEE ALSO: BOMBSHELL: Facebook Bankers Secretly Cut Estimates In Middle Of IPO Roadshow
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Thanks taking the time to add
Thanks taking the time to add more so we could understand... every aspect of life has had so much convolution.....mahalo