Morgan Stanley and Facebook are both being criticized for their handling of the Facebook initial public offering. From a Wall Street Journal editorial:
Morgan Stanley is also getting deserved criticism for the way it handled retail investors not on its client lists. The bank allocated about 25% of the IPO, an unusually high percentage, to retail even as its analysts were warning big institutional clients about their concerns with the stock. Some of those retail investors bought the stock during its early price run-up and have since suffered losses. The obligatory Congressional outrage and SEC investigation are now underway.
From an article in Business Insider by Henry Blodget, the former analyst who helped to inflate the Internet stock bubble of the late 1990s: "news of Facebook's business slowdown was shared with big investors and not little ones...once again, big Wall Street insiders got privileged information. And little investors got the shaft."
A problem with this analysis is that the institutional investors who supposedly "got privileged information" still bought 75% of the issue at the exact same $38 initial price as the little investors who supposedly "got the shaft."
It's going to be interesting to compare the uproar over the Facebook-Morgan Stanley IPO "privileged information" with the reaction to Henry Paulson's July 21, 2008 briefing of Eric Mindich, Stephen Mandel, Dinakar Singh, Frank Brosens, James Chanos, Steven Rattner, Bennett Goodman, and Daniel Och about his plans for Fannie Mae and Freddie Mac. It seems like the outrage and investigations to which the Wall Street Journal refers are less obligatory in some cases than in some others.
