BOSTON – Morgan Stanley, the lead bank on Facebook Inc.’s initial public offering, was fined $5 million by Massachusetts over claims the firm gave research analysts information that wasn’t provided to all investors in the sale, Bloomberg News reported last week.
“While retail investors were left to interpret vague qualitative information” from a regulatory filing, analysts were given “specific numbers” to lower their revenue estimates, Secretary of the Commonwealth William Galvin said last week in a statement announcing the settlement. Morgan Stanley engaged in dishonest and unethical practices and failed to supervise its employees, Galvin said.
A slump in Facebook’s stock after it began trading in May has fueled shareholder complaints, regulatory probes and more than 40 lawsuits, with some investors claiming the Menlo Park, Calif.-based social network company’s managers failed to disclose revised forecasts before the IPO. New York-based Morgan Stanley didn’t admit or deny Galvin’s claims in settling.
Just days before the offering, Facebook officials privately told securities-firm analysts to lower earnings and profit estimates – largely on the dearth of revenue from mobile users. An unidentified senior investment banker at Morgan Stanley “orchestrated” the calls to analysts, according to Galvin’s statement.
The banker “was not allowed to call research analysts himself, so he did everything he could to ensure research analysts received new revenue numbers, which they then provided to institutional investors,” Galvin said in the statement.
A Facebook regulatory filing on May 9 warned investors that users were growing faster than advertising delivered to users. The warning was widely reported by the media. •