What was once deemed as the potential for one of the biggest stocks to hit Wall Street since Apple and Google has now become a huge controversy that has created speculation of foul play among investors and company insiders. Facebook’s recent IPO was initially met with excitement and hope for retail investors that were looking to get a piece of a company that is now valued at more than 100 billion dollars. Unfortunately, their hopes were crushed as the Facebook IPO opened at a staggering $38. To make matters worse, it wasn’t until the price of a share hit $45 that retail investors were actually able to get in on the action. Now, the stock is sitting at a measly $31, lower than its initial offering in the first place. While we’ve seen stocks come back from bigger deficits, there’s been lots of debate as to the ethics behind the Facebook IPO that could change Wall Street forever.
Morgan Stanley, who played the part of underwriter for Facebook, is being accused of tipping big investors that it would cut estimates for revenue in the upcoming year. Even while doing so, it continued to raise the price of an already expensive IPO. If you didn’t have 10 million dollars laying around in your brokerage account, you were left to wait until the price had already skyrocketed to $45 per share.
This not only has huge impacts on Facebook and the future of the stock, which already has to recover nearly 20% of its losses, but on the future of other stocks as well. As IPOs get released, it’s understood that any news regarding the stock is public information right off the bat. If investors feel that news is being withheld from them, or only disclosed to larger investors, people could easily be dissuaded from buying more IPOs in the future. Additionally, this could have serious impact on the success of Morgan Stanley. By covering up vital news regarding a stock and still raising prices, ethics and morals will both be questioned for their future releases.
This isn’t to say that the Facebook IPO could actually recover from the downward spiral it seems to have hit, but they’ve got a long road to go now. Mark Zuckerberg needs to step forward and be the same aggressive person he has always been to come up with new and fresh ideas to completely beat out next year’s estimates.