This is total nonsense. If there is
any issue at all it behooves the SEC to rescind the entire offering
and reverse all trades. It can be done now. Otherwise the SEC will
wear it for failure to act. All offerings have a rarely used right
of rescission and in the case were it has been badly handled and
opinions are changed in what is called the quiet period, withdrawal
of the offering and resubmission is surely called for.
Right now Morgan Stanley is trying to
tough it out and accruing all the bad press that attracts. A
completely recoverable situation is turning into a market pig because
someone does not want to admit they blundered. The SEC needs to do
the smart thing and reset the clock and let everyone take a deep
breath.
I am sure that there are some pretty
exciting meetings going on at the moment.
Facebook lawsuits add to IPO
troubles
by Associated
Press
Facebook’s initial
public offering is the subject of two congressional inquiries and
mounting lawsuits as the social network enters its fifth day of
public trading. The shares regained some ground Wednesday, rising $1,
or 3.2 percent, to close at $32. They were up another 50 cents, or
1.6 percent, to $32.50 in early premarket trading Thursday. But they
are still more than 14 percent below their $38 per share IPO price
last week.
The stock’s rocky
inaugural trading day last Friday was followed by a two-day decline.
The launch was held up by a half-hour delay, caused by glitches on
the Nasdaq Stock Market. It was marred further this week as investors
began accusing the banks that arranged the IPO of sharing important
information about Facebook’s business prospects with some clients
and not others.
Several shareholders
who bought stock in the IPO have filed lawsuits against Facebook, its
executives and Morgan Stanley, the IPO’s lead underwriter. At
question is whether analysts at the big underwriter investment banks
cut their second-quarter and full-year forecasts for Facebook just
before the IPO, and told only a handful of clients about it.
One lawsuit, filed in
U.S. District Court in New York, claims Facebook’s IPO documents
contained untrue statements and omitted important facts, such as a
“severe reduction in revenue growth” that Facebook was
experiencing at the time of the offering. The suit’s three
plaintiffs, who bought Facebook stock on its first day of trading May
18, claim they were damaged in the process.
Morgan Stanley
declined to comment. Facebook said the lawsuit is without merit.
Another lawsuit, filed
in San Mateo County Superior Court in California, claims Facebook and
underwriters misled investors in Facebook’s IPO documents. Both
lawsuits seek class action status on behalf of investors who bought
Facebook stock and lost money on Friday. “No one gets it perfect,
as far as saying what the financial results are,” said Anthony
Michael Sabino, professor at St. John’s University’s Peter J.
Tobin College of Business. The bottom line, he added, is whether
Facebook or the underwriter had material information about Facebook’s
finances that was not disclosed publicly. “At this moment, it’s
still too early to say,” Sabino said. “We don’t know enough,
but this could turn out to be an issue.”
What is known is that,
in March, Facebook began meeting with analysts at the underwriting
firms. The gatherings are a customary part of the IPO process and are
designed to help analysts understand the company’s business so they
can make accurate financial projections. On May 9, the third day of
Facebook’s pre-IPO roadshow to meet with prospective investors, the
company filed an amended IPO document that said its number of mobile
users was growing faster than its revenue. According to a person
familiar with the matter, Facebook then had another meeting with
analysts and told them that based on the new information in the
filings, the analysts’ forecasts should be at the low end of the
range that the company gave them in April. The person spoke on the
condition of anonymity because they were not publicly authorized to
discuss the matter.
Adding to Wednesday’s
events, Facebook was in talks with the New York Stock Exchange to
move its stock from the Nasdaq Stock Market after the botched
offering, according to a person familiar with the matter. The person
spoke on the condition of anonymity because they were not authorized
to speak publicly. The news of the talks was first reported by
Reuters.
NYSE spokesman Rich
Adamonis said: “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.”
A Nasdaq spokesman
declined to comment.
Sen. Tim Johnson,
D-S.D., chairman of the Senate Banking Committee, said late Wednesday
that his panel wants to learn more about the social network’s
initial offering. The committee seeks briefings with Facebook
representatives, regulatory agencies and others. After the briefings,
Johnson said, he will determine whether a hearing should be held.
Also gathering
information about Facebook’s IPO is the House Financial Services
Committee. An aide to that panel said its staff is getting briefings.
The subject is likely to be raised in hearings by the committee in
the coming weeks, even though no hearings are planned specifically on
the Facebook IPO, the aide said. The aide spoke on condition of
anonymity because the House committee’s planned inquiry hasn’t
been publicly announced.
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