Morgan Stanley (NYSE: MS) has sent a letter 17,200 brokers at its Morgan Stanley Smith Barney brokerage houses telling the brokers that the bank is reviewing customer orders for the IPO of Facebook Inc. (NYSE: FB) and that the bank will make a price adjustment if the customer paid too much for the stock. That comes from a report at StreetInsider.com.

An even more interesting analysis by Reuters blogger Felix Salmon, who explains how Morgan Stanley might actually have made a pile of money by propping up FB’s share price last Friday. Salmon argues that the greenshoe shares were the equivalent of a big short:

Chances are, no one outside the company will ever know for sure what Morgan Stanley’s P&L on the Facebook IPO ends up looking like. But it would make sense, if Morgan Stanley saw a lot of selling pressure on Friday, for the bank to keep [holding] onto at least a little bit of its short position into Monday morning. At which point it could make a tidy profit on that plunging share price.

Facebook’s IPO — the gift that keeps on giving.

Paul Ausick

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