Did we really expect anything less from the Facebook IPO? It was oversubscribed, overvalued, over-hyped, and overblown more than any other IPO in history.
While Facebook stock will most likely prove to be an excellent investment like Google or Apple its IPO was still a recipe for a classic Wall Street swindle.
Enter Morgan Stanley, Facebook management, and the unsuspecting individual stock investor. In a classic pump-and-dump Morgan Stanley allowed Facebook’s IPO price to be over-valued as they quietly prepared downward adjustments to Facebook’s short-term revenue projections, shared this crucial decision-making information with their wealthiest clients, but withheld it from average investors.
Facebook management exacerbated the potential disaster when at the last minute it upped the number of shares being issued to the public by 25%.
The fix was on. Wealthy investors had privileged information the unsuspecting public did not. Leading up to the IPO those in-the-know lined up their short trades and the rest is history. After Facebook’s stock opened in fiasco-fashion on day one, the short-side of the trade leaked and the dog-pile was on. Game over.
Shareholders have sued Facebook and CEO Mark Zuckerberg over the company’s bungled IPO, charging they hid bearish forecasts prior to going public, according to a report.
The suit charges that Facebook and its lead underwriter concealed “a severe and pronounced reduction” in Facebook revenue growth forecasts before the company’s shares were offered to the public, according to Reuters.
The lawsuit was filed in the U.S. District Court in Manhattan, according to Reuters, which did not provide further details.