SEC, FINRA to review Facebook issues, Nasdaq sued

Tue May 22, 2012 5:13pm EDT
 
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By Suzanne Barlyn and Ryan Vlastelica

(Reuters) - Two top U.S. financial regulators said the issues around the initial public offering of Facebook should be reviewed, putting fresh pressure on the company, its embattled lead underwriter and the Nasdaq.

After Friday's nearly flat close and Monday's 11 percent plunge, Facebook shares closed 8.9 percent lower at $31 on volume of 101 million shares. At that price the company has shed more than $19 billion in market capitalization from its $38-per-share offering price last week.

Investors were still shaking their heads over the botched opening trading of Facebook when Reuters reported late Monday that the consumer Internet analyst at lead underwriter Morgan Stanley cut his revenue forecasts for Facebook in the days before the offering, information that may not have reached many investors before the stock was listed.

JPMorgan Chase and Goldman Sachs, which were also underwriters on the deal, each revised their estimates during Facebook's IPO road show as well, according to sources familiar with the situation.

Reuters reported that Morgan Stanley selectively disclosed the change in Facebook estimates, which drew the attention of the main regulator of U.S. brokerages.

"That's a matter of regulatory concern to us and I'm sure to the SEC," said Richard Ketchum, the Financial Industry Regulatory Authority's chairman and chief executive. "And without saying whether it's us or the SEC, we will collectively be focusing on it.

A Morgan Stanley spokesman declined to immediately comment on Ketchum's remarks.

Securities and Exchange Commission Chairman Mary Schapiro said investors should be confident in investing, but she conceded there were questions to answer as well.   Continued...

 
The Facebook logo is seen on a screen inside at the Nasdaq Marketsite in New York in this May 18, 2012, file photo. REUTERS/Shannon Stapleton/Files