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Morgan Stanley Fined $5 Million Over Handling of Facebook IPO

Investment bank, Morgan Stanley, has been fined $5 million by the US state of Massachusetts for its role in the botched Facebook initial public offering (IPO).


Facebook’s IPO descended into farce even before the NASDAQ stock exchange’s systems failed to cope with initial demand for the stock. Allegations that Morgan Stanley, the bank that underwrote Facebook’s IPO didn’t give investors a fair crack at material information that surfaced ahead of the IPO has resulted in the state of Massachusetts slapping the firm with a $5m fine.

Prior to Facebook’s shares going on sale, Morgan Stanley revised earnings and revenue forecasts but gave the information to only a select few investors rather than the public at large. The bank’s fine is the first from the botched Facebook IPO that has seen a number of institutional investors claim damages.

Morgan Stanley said it was “pleased to have reached a settlement”, adding that it is “committed to robust compliance with both the letter and the spirit of all applicable regulations and laws”.

However Massachusetts securities regulator William Galvin was somewhat more pointed with his remarks. He said, “The conduct at Morgan Stanley was more egregious. With [the fine] we will get their attention and begin to take steps in restoring some confidence for retail investors to invest.”

Facebook’s share price has fallen considerably since the IPO, although in recent weeks it has seen an upturn and yesterday it closed at $26.75.

This article was originally published on the Inquirer.

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