News / Economy

US Regulators Looking at Leadup to Facebook IPO

Facebook IPO Results in Lawsuit; Investigationi
|| 0:00:00
X
Carolyn Presutti
May 24, 2012
The recent, initial public offering of Facebook stock thrilled many traders on Wall Street and investors around the world. But now, a regulatory investigation and a major lawsuit hang over that publicized public offering. VOA's Carolyn Presutti has the details.

Facebook IPO Results in Lawsuit; Investigation

TEXT SIZE - +
WASHINGTON - The recent, initial public offering of Facebook stock thrilled many traders on Wall Street and investors around the world.  But after an intra-day spurt from $38 a share to over $40 a share on the opening day, the stock has dropped to just over $30.   
 
Now, a regulatory investigation and a major lawsuit hang over that publicized public offering.  
 
Facebook's much celebrated, initial public offering made global news.  But some investors didn't see the mammoth social network as a money maker.
 
U.S. lawmakers are also looking into issues with Facebook's initial public offering. 
 
The Senate Banking Committee says its staff will meet with Facebook officials, regulators and other stakeholders.  A spokeswoman for the House Financial Services Committee says staff members are being briefed on the issue and the topic will likely be raised in hearings. 
 
The Securities and Exchange Commission and the Financial Industry Regulatory Authority, Wall Street's investigative arm, have also called for a review of Facebook's IPO. 
"Everyone I know does not buy anything off of Facebook," said investor Jennifer Parker. "Those little click ads on the side.  Basically, I just click them off, and I'm like, 'uninterested, uninterested.'"
 
Turns out, Facebook knew that.  More and more mobile device users were ignoring ads.  So, Facebook advised underwriters to lower forecasts.  Lead underwriter Morgan Stanley did, but allegedly only shared those revised estimates with some investors.  
 
Jason Tanz, with the magazine Wired, said, "If people with more power and money to invest got a different set of facts and information and analysis than the average investor, then yes, that's troubling."
 
Jeff Sica, founder and chief investment officer of Sica Wealth Management, says the heat is really on the underwriters, who deny doing anything wrong. 
 
"The lawsuits are very indicative of investors' outright negative opinion of some of the underwriters like Morgan Stanley and Goldman Sachs.  Looking at it from the standpoint of how the retail investor feels about whether or not they can trust these institutions again is going to have very long lasting effects," he said. 
 
Troubling too, is a lawsuit against NASDAQ, the American stock exchange that handled Facebook's IPO.  Lead plantiff Philip Goldberg claims investors like him lost money because NASDAQ delayed or mishandled their stock orders.
 
Goldberg runs his own business from inside his Maryland condominium.  His attorney won't permit him to talk on camera, but Goldberg says he's a typical investor.
 
"The whole Facebook IPO has been a mess," said Patrick Carroll, the founder of Wealth Strategies Group, a financial consulting firm. He never recommended Facebook to his clients in the first place.
 
"I wouldn't be buying Facebook at any price at this point.  I'd wait to see what happened going forward, coming out with the regulatory issues," he said. 
 
Facebook is not commenting.  And, Morgan Stanley says it followed the same procedures with Facebook as it does with all IPOs.

Bernard Shusman contribted to this report. 

Carolyn Presutti

Carolyn Presutti is an award-winning television reporter who works out of VOA’s Washington headquarters.  She has won an Emmy, many Associated Press awards, and a Clarion for her coverage of Haiti,  national politics, the southern economy, and the 9/11 bombing anniversary.  In 2013, Carolyn aired exclusive stories on the Syrian medical crisis and the Asiana plane crash, and was VOA’s chief reporter from the Boston Marathon bombing.

You May Like

Multimedia Relatives of South Korean Ferry Victims Fire at Authorities

46 people are confirmed dead, but some 250 remain trapped inside sunken ferry More

War Legacy Haunts Vietnam, US Relations

$84 million project aims to clean up soil contaminated by Agent Orange More

Wikipedia Proves Useful for Tracking Flu

Technique gave better results than Center for Disease Control (CDC) and Google’s Flu Trends More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine, Russia, United in Faith, Divided in Politicsi
X
Michael Eckels
April 19, 2014
There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Ukraine, Russia, United in Faith, Divided in Politics

There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Face of American Farmer is Changing

The average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population. It’s a troubling trend signaling big changes ahead for American agriculture as aging farmers retire. Reporter Mike Osborne says a new report from the U.S. Census Bureau is suggesting what some of those changes might look like... and why they might not be so troubling.
Video

Video Donetsk Governor: Ukraine Military Assault 'Delicate But Necessary'

Around a dozen state buildings in eastern Ukraine remain in the hands of pro-Russian protesters who are demanding a referendum on self-rule. The governor of the whole Donetsk region is among those forced out by the protesters. He spoke to VOA's Henry Ridgwell from his temporary new office in Donetsk city.
Video

Video Drones May Soon Send Data From High Seas

Drones are usually associated with unmanned flying vehicles, but autonomous watercraft are also becoming useful tools for jobs ranging from scientific exploration to law enforcement to searching for a missing airliner in the Indian Ocean. VOA’s George Putic reports on sea-faring drones.
Video

Video New Earth-Size Planet Found

Not too big, not too small. Not too hot, not too cold. A newly discovered planet looks just right for life as we know it, according to an international group of astronomers. VOA’s Steve Baragona has more.
Video

Video Copts in Diaspora Worry About Future in Egypt

Around 10 percent of Egypt’s population belong to the Coptic faith, making them the largest Christian minority in the Middle East. But they have become targets of violence since the revolution three years ago. With elections scheduled for May and the struggle between the Egyptian military and Islamists continuing, many Copts abroad are deeply worried about the future of their ancient church. VOA religion correspondent Jerome Socolovsky visited a Coptic church outside Washington DC.
Video

Video Critics Say Venezuelan Protests Test Limits of Military's Support

During the two months of deadly anti-government protests that have rocked the oil-rich nation of Venezuela, President Nicolas Maduro has accused the opposition of trying to initiate a coup. Though a small number of military officers have been arrested for allegedly plotting against the government, VOA’s Brian Padden reports the leadership of the armed forces continues to support the president, at least for now.
Video

Video More Millenials Unplug to Embrace Board Games

A big new trend in the U.S. toy industry has more consumers switching off their high-tech gadgets to play with classic toys, like board games. This is especially true among the so-called millenial generation - those born in the 1980's and 90's. Elizabeth Lee has more from an unusual café in Los Angeles, where the new trend is popular and business is booming.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
AppleAndroid

World Currencies

EUR
USD
0.7217
JPY
USD
102.17
GBP
USD
0.5949
CAD
USD
1.1009
INR
USD
60.326

Rates may not be current.