Facebook IPO Raises Regulatory Concerns (updated)

Morgan Stanley bankers decided they had enough demand and interest for Facebook to justify an offering price of $38 a share. They didn’t. When Facebook went public on May 18, shares of the social networking company barely budged — and they have been falling ever since.

On May 22, the stock closed at $31, more than 18 percent below its offering price. The IPO of Facebook was supposed to be Morgan Stanley’s crowning achievement. The bank had helped usher in a new era of technology companies, leading the offerings of LinkedIn, Groupon, Pandora and more than a dozen other start-ups over the past year. Facebook was poised to be the biggest and most ambitious. When the dust settles, Morgan Stanley could make more than $100 million on the IPO. But Morgan Stanley may have given the market more than it can chew. Rival bankers and big investors have complained that Morgan Stanley botched the IPO., setting the price too high and selling too many shares to the public. Regulators are concerned, in part, that banks may have shared information with certain clients, rather than broadly with investors. On May 22, William Galvin, Massachusetts’ secretary of state, subpoenaed Morgan Stanley over discussions with investors about Facebook’s I.P.O. The Financial Industry Regulatory Authority, Wall Street’s self-regulator, is also looking into the matter.

See additional coverage:

Inside Fumbled Facebook Offering (WSJ)
http://online.wsj.com/article/SB1000142405270230401940457742066069837471...

Jenkins: The IPO From Hell? (WSJ – editorial)
http://online.wsj.com/article/SB1000142405270230401940457742038335886532...

Massachusetts subpoenas Morgan Stanley in Facebook case (AP)
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/05/22/national/a15...

Morgan Stanley defends handling of Facebook IPO (SF Chronicle)
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/23/BU1A1OLP8F.D...

Facebook IPO underscores shutting out the masses (SF Chronicle - editorial)
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/22/BU3K1OLCV5.DTL