The Facebook (NASDAQ: FB) IPO mess has worsened considerably in just 24 hours. The federal government will examine why analysts at Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) lowered their financial forecasts for the social network just ahead of the IPO. The concern is that favored clients knew about the changes, but the broader investment world did not.
The NASDAQ claims that if it had known how badly its technical glitches would be, it would have suspended the IPO until there was full confidence shares could trade smoothly.
There are also rumors that Facebook’s CFO David Ebersman decided at the last minute to increase the number of shares that would be offered by 25% without enough conversation with his entire team of bankers. Ebersman discussed his plans with lead underwriter Morgan Stanley. But, the decision caught many large investors by surprise and caused them to wonder whether the market had enough of an appetite for all of the news shares. Based on how Facebook has traded since the IPO, the answer is “no”
Douglas A. McIntyre
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