Since the start of the week, Facebook's stock price has been sinking like an anti-social stone. Despite NASDAQ's open admission about screwing up the offering, the Wall Street Journal is pointing its finger higher up the chain.
In an interesting peek behind the scenes of the offering, the Wall Street Journal reports that a string of rumours, suggestions and decisions involving Morgan Stanley — Facebook's bank — set the stock off in the wrong direction. From the article:
"Less than three days before Facebook Inc.'s initial public offering, Chief Financial Officer David Ebersman decided to boost the number of shares the company would offer investors by 25%, said people familiar with the planning. His main adviser at lead underwriter Morgan Stanley MS assured him there was plenty of demand...
"That decision by the 41-year-old Facebook executive may have doomed any real chance the social-networking company had that its stock would jump on its first day of trading-a hallmark of successful IPOs...
"Adding to the tumult on Tuesday was news that analysts at Morgan Stanley... told clients earlier this month that they were reducing their earnings estimates for Facebook following a filing that said the company's ad-sales growth isn't keeping up with expansion of its user base."
According to Business Insider, that communication of reduced earnings estimates only ever made it to larger investors — leaving everyone else without a clue what was happening. All of which, believes the Journal, could "dent the reputation of Morgan Stanley, long considered the marquee bank for technology offerings".
And what for Facebook? Well, while it's off to a bad start, really there's no telling what the long term holds. [Wall Street Journal]