Morgan Stanley Investigated over Facebook IPO Leak

Morgan Stanley will undergo an investigation following allegations the financial company shared negative news about Facebook among its top clients before its initial public offering. 

A lead underwriter from the company apparently gave the clients information that it was reducing its revenue forecast for the social networking company to give them the lead. 

The source of the tip was said to be an executive of Facebook, who was aware that the business was weak. The tipster also said Morgan Stanley advised major investors who were considering buying stocks of the company and in the process, left small investors in the dark. 

According to reports, Morgan Stanley is not even supposed to publish any estimates with earnings 40 days prior to a company’s IPO.  And while the tip is technically not illegal, many critics are saying that Morgan Stanley was being unfair to other investors.

The social networking giant Facebook sold 30.2 million shares and closed at least $US1.1 billion during its transaction, but stocks are already dropping. The IPO was offered at $37.58 per share and the company, based on its filing with the Securities and Exchange Commission, is going to use this money for taxes. 

Some investors, meanwhile, are still going to find out if their shares from Facebook’s IPO went through last Friday, as there was a glitch in the trading system at Nasdaq. They are considering suing Nasdaq for this, while Nasdaq responded that it would have stopped the IPO if they had known how wide the extent of the technical problem was.