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Post IPO – Facebook is sliding downhill.

Facebook’s historic $16 billion IPO last Friday is quickly showing signs of turning into flop. First there were technical problems with the NASDAQ systems on the day of the launch – this resulted in investors losing out on shares and orders being cancelled or lost.  Then later on the same day as the launch, the share price started to slide down – it was rescued when Wall Street banks bought large volumes of shares at a cost of billions of dollars.  This kept the share price artificially high. This week the share price has continued its downward spiral – losing 20 percent of its launch share price.

Facebook

Many technology analysts pointed out that the Wall street banks has over valued the shares and a more realistic value is around $10 per share. Now the US securities and exchange has opened an investigation into allegations that underwriter Morgan Stanley kept investors in the dark over forecasts that the stock would slide sharply and only informed a small circle of large Wall Street investors about the revised downgrading.  In addition, Morgan Stanley also informed this close circle concerning a reduction in revenue forecasts.

Brokers who over-ordered shares in the expectation that supply would be limited continued to complain they received too much stock to handle and were left in the dark about forecast changes.

One Morgan Stanley Smith Barney adviser also cited the fact that institutional investors received information that retail investors did not, calling it ‘a huge issue for the entire industry. But nothing is likely to be done to rectify this crucial issue. The small investor is just an outsider to Wall Street and the City and thus not privy to important information.

‘Night and day the institutional clients get things that we don’t get. It’s a big issue,’ the adviser said, adding there was surprise within the brokerage that Morgan Stanley, as lead underwriter, had not done more to support the share price.

Facebook share price has today plunged to just under $29, from a high of $43 at the IPO launch. Many small investors will have made losses.

 


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