The Straits Times
Published on Dec 18, 2012

Morgan Stanley fined $6.1m over Facebook IPO


WASHINGTON (AFP) - Morgan Stanley agreed on Monday to pay a US$5 million (S$6.1 million) fine to settle charges that it improperly handled crucial information on Facebook's earnings ahead of the company's disastrous Initial Public Offering (IPO).

The securities regulator of the state of Massachusetts had charged that Morgan Stanley, the lead underwriter for the US$16 billion stock issue in May, coached Facebook on how to present lowered earnings estimates to company analysts.

At the same time, those estimate revisions, made just days before the initial public offering closed, were not shared with all investors as Morgan Stanley set a high issue price and increased the number of shares on sale.

Facebook shares collapsed after the first day of trade on May 18, eventually falling to half the $38 IPO price, as institutional investors dumped the shares worried about lowered earnings potential.