With the third day on the books, Facebook’s stock is down even further than yesterday, to $31.12, well below the $38 IPO price. Friday’s glitches caused massive confusion and has even led to a lawsuit against the Nasdaq, which has seen its reputation tarnished. Now Morgan Stanley is also getting the side-eye because the financial firm, the lead underwriter on the initial public offering, unexpectedly cut Facebook’s revenue forecast.
The way the change was made — so close to the IPO and during the “road show” — is strange, say those in the know. If that information wasn’t disclosed properly to Morgan Stanley, there could be violations. Now the Securities Exchange Commission and the Financial Industry Regulatory Authority (FINRA) are nosing around, seeking a review.
“Some investors say they felt misled by the underwriters,” says Bloomberg. That’s definitely not a good look for a financial company these days.
Overall, there have been a lot of bad ingredients in this messy stew. Abnormalities, last-minute changes, freak glitches… all of it is adding up to uncertainty and heightening the scrutiny, just when you thought that wasn’t even possible.
“The downward spiral has left some people sitting on big losses, and others scratching their heads. After all, nothing fundamental has changed at Facebook in the days since the much-hyped company came to the stock market — Facebook still has more than 900 million users, its 28-year-old founder Mark Zuckerberg controls the company, and it is still one of the few profitable Internet companies to go public,” writes CBS and the AP.
As we said this morning, there’s a need for things to settle a bit on this. Like everything else in the 24/7 media, stories get hyped up to boiling and just when the pot is spilling over and the smoke detector is going off, the flame is turned down and the pot reduces to a simmer. Of course then you’re left with a hot mess all over the stove that you’ll have to scrub with a piece of Brillo.
So in other words, this IPO was a hot mess that will take some explanation, cool heads, and good business sense to clean up.
[image: Victor J. Blue/Bloomberg]