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.
"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.