Facebook and its co-defendants — banks including Morgan Stanley, the lead underwriter of its initial public offering — are seeking dismissal of a lawsuit on the grounds that the social network had no obligation to publicly disclose internal projections on how increased mobile usage and product decisions might affect future revenue.
Morgan Stanley, which served as one of the lead underwriters for Facebook’s much-hyped initial public offering, is coming under scrutiny by the state of Massachusetts. The state fined Morgan Stanley $5 million, claiming that the financial firm helped Facebook leak sensitive information to select companies, creating an unfair playing field for investors.
Investor Uma Swaminathan of East Brunswick, N.J., filed a claim with the arbitration unit of the Financial Industry Regulatory Authority in July, regarding Morgan Stanley’s role in Facebook’s botched initial public offering. However, there’s one problem: Morgan Stanley said Swaminathan was not one of its customers.
Facebook’s initial public offering launched May 18 at $38 per share, and the social network’s stock ended the trading day up just 23 cents. But according to a blog post on Liberty Street Economics, Facebook’s underwriters were a major factor in keeping the stock from plummeting on its first day.
The state of Massachusetts fined Citigroup $2 million after finding that one of the company’s junior analysts improperly disclosed confidential information prior to Facebook’s May 18 initial public offering, according to reports.
A source familiar with the Securities and Exchange Commission told Bloomberg that while the agency’s investigation of Facebook over its actions prior to its May 18 initial public offering is still ongoing, no evidence has been found that the social network withheld material information from investors.
The bad news related to Facebook stock continues to roll in, with analysts for two of the social network’s largest underwriters, Morgan Stanley and J.P. Morgan, lowering their price targets, according to reports.
Lead underwriter Morgan Stanley began doling out the $100 million or so in profit earned by banks as a result of Facebook’s initial public offering to the rest of the underwriters, according to reports.