Facebook Bankers Secretly Cut Earning Forecasts Before IPO

Reuters’ Alistair Barr is reporting that Facebook’s lead underwriters, Morgan Stanley (MS), JP Morgan (JPM), and Goldman Sachs (GS) all cut their earnings forecasts for the company in the middle of the IPO roadshow.

This by itself is highly unusual (I’ve never seen it during 20 years in and around the tech IPO business). But, just as important, news of the estimate cut was passed on only to a handful of big investor clients, not everyone else who was considering an investment in Facebook. This is a huge problem, for one big reason:

    • Selective dissemination. Earnings forecasts are material information, especially when they are prepared by analysts who have had privileged access to company management. As lead underwriters on the IPO, these analysts would have had much better information about the company than anyone else. So the fact that these analysts suddenly all cut their earnings forecasts at the same time, during the roadshow, and then this information was not passed on to the broader public, is a huge problem.


What’s more, it’s likely that news of these estimate cuts dampened interest in the IPO among those who heard about them. In other words, during the marketing of the Facebook IPO, investors who did not hear about these underwriter estimate cuts were placed at a meaningful and unfair information disadvantage. They did not know what a lot of other investors knew, and they suffered for it.

Selective dissemination of this sort could be a direct violation of securities laws. Irrespective of its legality, it is also grossly unfair. The SEC should investigate this immediately..

Do you agree that the selective disclosure is unfair for the buyers? Share your opinions with us!

Source: Yahoo News

Image: Technorati

World Stocks Fall Due To Growth Fears

Stocks have fallen on fears over the health of the global economy, after last week’s weak US jobs data and persistent fears over the eurozone.

Figures released on Friday by the US Labor Department showed the smallest growth in employment in five months. The US economy added 120,000 jobs during March, less than the 200,000 widely predicted by analysts. Investors in Europe were given their first chance after the Easter break to react to Friday’s disappointing US jobs data. The figures raised fears about the strength of the recovery in the US economy.

Meanwhile, the interest rate on Spanish bonds traded in the secondary market continued to rise. The yield on 10-year bonds hit 5.99%, up from 5.74% on Monday, indicating that investors are getting increasingly concerned about Spain’s ability to repay its debts.


Investors in Europe also had an eye on Chinese data showing a rise in exports but a sharp fall in imports, while a report from the Organisation for Economic Co-operation and Development (OECD) also gave mixed messages. It identified a “potential turning point in economic activity in the euro area and regained momentum in other major economies”, particularly the US and Japan.

But the report also talked of “diverging” economies in Europe, with Germany and the UK showing a “positive change in momentum” but France and Italy displaying “continued sluggish activity”. Analysts noted general caution ahead of the first quarter reporting season in the US, beginning later on Tuesday with aluminium giant Alcoa.

Source: BBC News

Image: Asia Bizz