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 12:37 AM
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
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 Emmy and Silver World Medal award winning television correspondent who works out of VOA’s Washington headquarters.   She has also won numerous Associated Press awards and a Clarion for her coverage of The Syrian Medical Crisis, Haiti, The Boston Marathon Bombing, Presidential Politics, The Southern Economy, and The 9/11 Bombing Anniversary.  In 2013, Carolyn aired exclusive stories on the Asiana plane crash and was named VOA’s chief reporter with Google Glass.

You can follow Carolyn on Twitter at CarolynVOA, on Google Plus and Facebook.

You May Like

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. More

Video Sudan School Becomes Target of Aerial Attacks

Dropout rate at an all-time high in South Kordofan state because many schools have been destroyed during 3-year civil war More

Tennessee Songbirds Fly Coop Long Before Tornadoes Arrive

Researchers say birds apparently alerted to danger by sounds at frequencies below range of human hearing 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.
US: Response to Sony Hack Will Be Proportionali
X
Aru Pande
December 19, 2014 1:45 AM
The White House says President Barack Obama considers the cyberattack on Sony Corp. a serious national security matter and that the U.S. will counter with an "appropriate response." VOA correspondent Aru Pande reports.
Video

Video US: Response to Sony Hack Will Be Proportional

The White House says President Barack Obama considers the cyberattack on Sony Corp. a serious national security matter and that the U.S. will counter with an "appropriate response." VOA correspondent Aru Pande reports.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8140
JPY
USD
118.81
GBP
USD
0.6402
CAD
USD
1.1597
INR
USD
63.066

Rates may not be current.