Subscriber Account active since. Earlier, we reported that the analysts at Facebook's IPO underwriters had cut their estimates for the company in the middle of the IPO roadshow, a highly unusual and negative event. The analysts cut their estimates because a Facebook executive who knew the business was weak told them to.
Put differently, the company basically pre-announced that its second quarter would fall short of analysts' estimates. But it only told the underwriter analysts about this. The information about the estimate cut was then verbally conveyed to sophisticated institutional investors who were considering buying Facebook stock, but not to smaller investors.
The estimate cut appears to have influenced the investment decisions of at least some institutional investors, dampening their appetite for Facebook stock, and crucially, affecting the price at which they were willing to buy Facebook stock.
As I described earlier , at best, this "selective disclosure" of the estimate cut is grossly unfair to investors who bought Facebook stock on the IPO or at any time since and didn't know about it. This was highly unusual, if not unprecedented I've been in and around the tech IPO business for almost 20 years, and I've never heard of it happening. Analysts cutting estimates is generally regarded as significant negative news for stocks. This is especially the case when the analysts who cut their estimates are very close to a company—and, therefore, are thought to have particularly good information.
In the old days, before the implementation of Regulation Fair Disclosure, companies used to manage the market's expectations by telling trusted analysts to change their estimates. Reg FD banned that practice. It is inconceivable that a reasonable investor would consider the sudden reduction of the underwriter analysts' estimates to be immaterial to an investment decision. More broadly, everyone is still trying to understand what happened with the pricing of the IPO, which was hyped up to be the offering of the century.
We now have some more information on that. Given the PR and legal disaster that the Facebook IPO is rapidly becoming, most official communications channels have gone silent. Facebook declined to comment. Morgan Stanley did not return a call and email seeking comment. We have spoken to several sources familiar with aspects of the transaction.
We do not have complete details yet, but a general picture of what happened is starting to take shape. For now, please regard most of the information below as scuttlebutt, as it has not yet been confirmed.
In early May, as Facebook prepared to kick off its IPO roadshow, the research analysts at the company's lead underwriters developed financial forecasts to facilitate the marketing and pricing of the IPO. Such estimates are usually developed through close collaboration between the underwriters' research analysts and company management.
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How to Analyze Meta. Doing Due Diligence. If You Decide It's a Buy. The Bottom Line. Key Takeaways Meta formerly Facebook has grown to become one of the largest and most well-known tech companies in the world. Since its IPO in , the company's shares have risen greatly, and despite some bumps in the road, reached all-time highs toward the end of If you decide to buy FB shares, you can do so readily using your broker or through your financial advisor.
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You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. It's part of what you do on a social media platform as you interact. This obviously could've been done way earlier. Regardless, I don't know that there's much that Facebook can do to screw this up. It is so connected. I remember a while back people were upset at Facebook because it was late to get on board with filtering political content or whatever the issue was.
People may have deleted the app off their phone, but they've continued to grow exceedingly well, even as large as they are. This could be, I remember one of the congressmen talking about "this is their tobacco moment. They still make money, and the tobacco executives to me handled that crisis the worst way that they could.
It's certainly not the growth companies that they were in the past, but they didn't disappear overnight. This one will be interesting to watch for me anyway, from the sidelines. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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