Facebook’s IPO: Morgan Stanley’s Conflict of Interest

Morgan Stanley’s underwriting of Facebook’s IPO has been thought by some of the bank’s rivals to be incompetently managed.  According to the New York Times, “(r)ival bankers and big investors have complained that Morgan Stanley botched the I.P.O., setting the price too high and selling too many shares to the public.”[1] Interestingly, the incompetence is positively correlated with unethical policy decisions at the bank. Even as the bankers as underwriters were eager to sell lots of shares, they may have given some of their institutional customers—albeit only the most preferred, as per the bank’s other services—some privileged information. If this charge is true, the conflict of interest at the bank should be closely examined by Congress and any relevant regulators.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Evelyn Rusli and Michael De La Merced, “Facebook I.P.O. Raises Regulatory Concerns,” The New York Times, May 22, 2012.

The Huffington Post Gilds the Lily: Facebook’s IPO Plummets?

On the day of its IPO, Facebook issued at $38 and went to a high of $45 before returning to near its issue price (closing at $38.23). On the next trading day, the price fell to about $34 in the early afternoon. This represents about 10% off the issue price. The Huffington Post headlined “Stock Plummets,” which must have been irresistible to anyone who had bought the stock. The Huff was using the $45 high as its benchmark, from which the $34 price represents a 25% drop. As if that were a plummeting, using the 10% off figure would have made the self-aggrandizing headline too obvious. At the very least, the headline detracts from the credibility of the Huffington Post.

The full essay is at "Taking the Face Off Facebook."