No Right Turns on Wall Street

Daily Herald (Arlington Heights, IL), May 24, 2012 | Go to article overview

No Right Turns on Wall Street


Byline: Associated Press

NEW YORK -- Almost four years after the financial crisis, Wall Street still can't get it right.

Investor anger mounted Wednesday over the initial public offering of Facebook stock last week, which was fumbled by the banks that managed the deal and complicated by technical problems at the Nasdaq stock exchange.

Shareholders filed at least two lawsuits against Facebook and Morgan Stanley, the bank that shepherded the IPO, over reports it withheld negative analyst reports about Facebook from some clients before the company went public.

It was the second stumble this month by a major Wall Street firm. JPMorgan Chase, usually revered for taming risk, has yet to contain a growing $2 billion loss in a trading unit.

The missteps are further eroding the confidence of Main Street, or what was left of it after the financial meltdown of 2008, and reinforcing the sense that the game is rigged.

Judson Gee, a financial adviser in Charlotte, N.C., placed a call Wednesday to a client who had plowed $50,000 into Facebook stock on Friday, the day of the IPO.

Gee said he called to tell the client, a restaurateur, about reports that Morgan Stanley had told only select customers about an analyst's reduction of revenue estimates for Facebook just before the IPO.

"I could see his jaw dropping on the other side," Gee said. "A lot of expletives came out." He said his client had asked: "How can they give that information to the big boys and not give it to the public?"

In the final planning of the IPO, Facebook, working with Morgan Stanley, raised the total number of shares being offered for sale by 25 percent, to 421 million. They expected extraordinary demand for the stock by investors.

That appears to have been a miscalculation. Facebook stock jumped from $38 to as high as $45 in the opening minutes, but quickly sank toward $38 again. It dropped to about $34 on Monday and $31 on Tuesday. The stock recovered somewhat on Wednesday and climbed $1.

Dayna Steele, a motivational speaker in Houston, said she planned to wait and buy the stock "when everybody finishes suing each other."

The shareholder lawsuit, filed in federal court in Manhattan, accuses Morgan Stanley of withholding the negative analyst report from some clients while it prepared to take the stock public.

One of the investors suing, Dennis Palkon, a professor at Florida Atlantic University, said that IPOs are tricky, but "this one had a lot of glamour, had a lot of interest. It has a lot of users. I thought it'd be a pretty good investment."

He bought 1,800 shares of Facebook at $38 through his ETrade account, meaning that after Tuesday, he was down more than $12,000 on paper.

"I think there were problems all over the place," he said. "It was totally poor planning to raise the price as high as they did and then to add all those extra shares."

Morgan Stanley declined comment on the suit, but it said on Tuesday that it had complied with regulations in how it handled analyst reports before the IPO. Facebook called the lawsuit "without merit."

The Senate Banking Committee, the Securities and Exchange Commission and other regulators also plan to look into the IPO.

Regulators will probably want to comb over Facebook's prospectus, the information it provided to potential investors, to make sure the company's disclosures were accurate and complete.

State securities laws and industry rules, mostly broader in scope than SEC rules, give state and industry regulators a wider berth to sanction investment firms they accuse of failing to act in investors' best interest.

The first trading in Facebook stock, originally set for 11 a.m. Friday, was delayed half an hour by technical glitches at the Nasdaq Stock Market, and brokerages are still sorting through problems with orders.

A person familiar with the matter, speaking on condition of anonymity because the person was not authorized to speak publicly, told The Associated Press that Facebook was in talks with the New York Stock Exchange to move its stock listing there from Nasdaq. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

No Right Turns on Wall Street
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.