Morgan Stanley, the lead underwriter for Facebook’s May initial public offering (IPO), is to pay US$5 million to the Massachusetts securities regulator in settlement of claims of improper conduct in the lead-up to the IPO.
While the company has not openly admitted or denied guilt, it has agreed to pay the fine, with a spokesperson commenting only that it is “pleased to have reached a settlement” and “to have put this matter behind us”.
The company added that: “Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws.”
Morgan Stanley was the key underwriter in the long-awaited Facebook IPO in May, which valued the social media company at US$104 billion, and has since come under fire amidst allegations that it only informed selected clients about revisions to Facebook’s projected revenues.
According to the securities regulator, Morgan Stanley became aware of revisions to figures which valued the company’s projected annual revenue at 3 percent lower than in the filed paperwork available to investors, and as such set up telephone calls with select investors to inform them of the revisions.
These new valuations were not made available to independent investors, with William Galvin, Secretary of the Commonwealth, concluding that: “Main Street investors were put at a significant disadvantage to Wall Street.”
Launching trading at a top-end estimate price of US$38 per share, Facebook saw an initial uptake of shares, selling 421 million shares amounting to US$16 billion. However, the stock has since performed poorly, dropping some 30 percent since the IPO amidst numerous allegations against various underwriters.
In October, the Massachusetts regulator also imposed a UUS$2 million fine on Facebook co-underwriter Citigroup, for having illegally revealed confidential research on the IPO to technology bloggers.