Facebook Insider Trading

#2
#2
Unfortunately, I doubt much will come of this. But it's clear that something very fishy happened.
 
#3
#3
This is ridiculous. What motivation did Morgan-Stanley have to f*** Facebook over?

May 18, 2012|Nadia Damouni and Olivia Oran | Reuters

NEW YORK (Reuters) - Lead Facebook Inc underwriter Morgan Stanley took a bet earlier this week when it increased the size of the social networking firm's $16 billion initial public offering and it boosted the price.

Thanks to massive hype surrounding Facebook's historic public offering, the wager looked safe. But a rocky first day of trading has raised questions about whether it paid off.

After a delayed start to trading, Facebook's shares spent much of the day struggling to stay above the $38 IPO price - and ended with just a 23-cent gain.

As a result, Morgan Stanley may have spent billions of dollars to support the stock price by buying shares in the market. Some market participants said that the underwriters had to absorb mountains of stock to defend the $38 level and keep the market from dipping below it.

=====

The debut marks a rare stumble for a high-profile IPO. Facebook is the only recent U.S. internet listing not to enjoy a large price jump on its first day of trading. LinkedIn , Groupon and Pandora Media all saw significant gains at their public debuts.

The debut also underscores Morgan Stanley's go-it-alone handling of the offering process. Though 32 other underwriters signed on to the deal, Morgan Stanley retained tight control over information, decisions and allocations of shares, according to other underwriters.

To be sure, Morgan Stanley's strong approach may have been crucial to managing such a large, high-profile offering with so many underwriters. And the fact that the stock didn't soar on its first day means they achieved full value for their client.

Some issues were beyond Morgan Stanley's control. Glitches at the Nasdaq stock exchange delayed the start of trading by 45 minutes, and throughout the day many investors did not receive confirmations that their orders had been completed, brokers at Morgan Stanley, Raymond James & Associates and others said. That uncertainty about their positions may have prompted some investors to sell, worsening the downward pressure on the stock.

Nasdaq posted a notice late in the day saying that orders entered for the stock before trading started "resulted in nothing being done" and offering to match orders if customers send in requests by Monday. Sources said the exchange was working through the weekend to deal with the botched trades.

Facebook also altered its guidance for research earnings last week, during the road show, a rare and disruptive move.

Morgan Stanley made big bet on Facebook - Chicago Tribune
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Morgan-Stanley made a bad bet.
 
#4
#4
Articles saying that MS lowered its revenue forecasts right before the IPO and told some investors, but not others.

And CNN reports breaking news that FB, MS, and Zuckerberg being sued by shareholders.

What a collosal mess.
 
#5
#5
lawgator1 said:
Articles saying that MS lowered its revenue forecasts right before the IPO and told some investors, but not others.
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Allegations. Morgan-Stanley was fiercely buying up shares that were not selling in order to try to stabilize the market price of the shares; why would they want less buyers? The notion is absurd.

lawgator1 said:
And CNN reports breaking news that FB, MS, and Zuckerberg being sued by shareholders.
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Individuals who lost a lot of money and want to blame others; Morgan-Stanley lost a lot of money, as did FB and Zuck.
 
#6
#6
MS bent over backward for the IPO, they did not Ef FB. Nasdaq should have postponed it b/c their system was overwhelmed. People put in orders and were not sure if they executed or not

Its been trading on the secondary market for 3 years now and has been trading at the 30-40 level for over a year

FB was upgraded today with a 40 price target
 
#7
#7
therealUT said:
Allegations. Morgan-Stanley was fiercely buying up shares that were not selling in order to try to stabilize the market price of the shares; why would they want less buyers? The notion is absurd.



Individuals who lost a lot of money and want to blame others; Morgan-Stanley lost a lot of money, as did FB and Zuck.
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Good point unless the analyst at the core of this is playing both sides against the middle.
 
#9
#9
Looks fishy. Unfortunately, this means more Dodd-Frank type crap legislation is likely
 
#10
#10
The free market works when everybody is playing by the same rules and with the same information. To insure that, regulation is needed against things like insider trading, etc. But, regulation by strict definition is antithetical to true free market principles.

So regulations do not mean markets are truly free, but free markets need regulation to be free. :unsure:

I don't know. Not sure any of that makes sense.

As far as Facebook IPO, something doesn't seem right, but who knows.
 
#11
#11
Investors file lawsuit against Facebook, Morgan Stanley - May. 23, 2012

The lawsuit states that "certain of the underwriter defendants" were given estimates for how Facebook would perform in the second quarter and for the full year.

The "revisions were material information which was not shared with all Facebook investors, but rather, was selectively disclosed by defendants to certain preferred investors and omitted from the registration statement and/or prospectus," the plaintiffs claim.
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#12
#12
rjd970 said:
The free market works when everybody is playing by the same rules and with the same information. To insure that, regulation is needed against things like insider trading, etc. But, regulation by strict definition is antithetical to true free market principles.

So regulations do not mean markets are truly free, but free markets need regulation to be free. :unsure:

I don't know. Not sure any of that makes sense.

As far as Facebook IPO, something doesn't seem right, but who knows.
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isn't the counter argument that in a free market more transparent companies will be rewarded b/c investors will be incentivized to invest? in other words there would be a disincentive to withhold information b/c investors won't want to invest with you.

a company could lie or withhold important data, thereby screwing its investors but savvy investors would no longer invest with the company or its management, and the investors might also have a private cause of action.
 
#13
#13
rjd970 said:
Morgan Stanley’s $2.4 billion Facebook short | Felix Salmon
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This is a most misleading headline and article. Imagine that Morgan-Stanley did intentionally short the stock (and, intentionally let information out to investors re: FB), so that they could buy 63M at $34, instead of $38. They make $252M (not $2.4B, that is total revenue but does not count opportunity cost of not buying at $38).

However, they also bought 28.5M shares at $38.01, if the stock price drops to $34, they lose $114M on those shares. If they also bought another 43M shares at $38, then the price drops to $34, they lose another $172M.

Such an intentional down-grade of the market would not make much sense for Morgan-Stanley.
 
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#14
#14
rjd970 said:
The free market works when everybody is playing by the same rules and with the same information. To insure that, regulation is needed against things like insider trading, etc. But, regulation by strict definition is antithetical to true free market principles.

So regulations do not mean markets are truly free, but free markets need regulation to be free. :unsure:

I don't know. Not sure any of that makes sense.

As far as Facebook IPO, something doesn't seem right, but who knows.
Click to expand...

Regulations are definitely needed - their focus should be transparency that allows investors to assess risk.

Unfortunately, some of Dodd-Frank and other proposed regs are actually trying to prevent risk rather than expose it and let the investor decide
 
#15
#15
therealUT said:
This is a most misleading headline and article. Imagine that Morgan-Stanley did intentionally short the stock (and, intentionally let information out to investors re: FB), so that they could buy 63M at $34, instead of $38. They make $252M (not $2.4B, that is total revenue but does not count opportunity cost of not buying at $38).

However, they also bought 28.5M shares at $38.01, if the stock price drops to $34, they lose $114M on those shares. If they also bought another 43M shares at $38, then the price drops to $34, they lose another $117M.

Such an intentional down-grade of the market would not make much sense for Morgan-Stanley.
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From the article:

This is a very big trade: 63 million shares at $38 each comes to $2.4 billion. On the other hand, there’s very little doubt that Morgan Stanley was doing a lot of buying on Friday. 43 million shares were bought at $38.00 exactly, and another 28.5 million shares were bought at $38.01. It’s reasonable to assume that most if not all of that buying came from Morgan Stanley, supporting the share price.

So the chances are that at the end of the day, Morgan Stanley is going to end up pretty flat on its trade, selling the shares at $38 and then buying them back at $38. But if it bought more than 63 million shares on Friday, then it is sitting on a substantial mark-to-market loss right now. And similarly, if it bought back fewer than 63 million shares on Friday, then it’s actually making a profit on its greenshoe short.
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Even looking at it the way you explained, they would still be in position to make money on the short, no?
 
#16
#16
rjd970 said:
From the article:



Even looking at it the way you explained, they would still be in position to make money on the short, no?
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Sorry, I typed the wrong number. They lost $172M on the 43M shares. So, they actually lose overall on the intentional downgrade of the market.
 
#17
#17
volinbham said:
Regulations are definitely needed - their focus should be transparency that allows investors to assess risk.

Unfortunately, some of Dodd-Frank and other proposed regs are actually trying to prevent risk rather than expose it and let the investor decide
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ding, ding, ding
 
#18
#18
So I know nothing about finance, but if FB revises its SEC filings why does Morgan Stanley need to make public its earnings expectations? It seems that, since FB’s revised filings were public other major market makers would revise their earnings projections…Again I didn’t study finance so this may be totally normal and I’m just out of the loop.
 
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