Not that we needed any more evidence that the individual investor often does not get a fair shake on Wall Street, but Morgan Stanley (NYSE:MS) just gave us some anyway.
News broke yesterday that MS will pay a $5 million fine — or in Morgan Stanley’s world, virtual chump change — to the Massachusetts’ securities regulator over the disastrous Facebook (NASDAQ:FB) IPO.
Morgan Stanley admitted that its investment bankers had too much influence on the research analysts, who themselves were somewhat bearish on the deal, thanks in part because of concerns about the deterioration in Facebook’s revenues caused by the rapid shift of traffic to mobile.
They advised their top clients about this — but not retail investors.
It’s not clear how much Morgan Stanley profited from the Facebook IPO, but rest assured it was more than $5 million. The company got a split of the $170 million in underwriting fees. Then there were profits from the “stabilization” of the deal, which included the purchase of stock to try to keep Facebook’s stock price above the offering price. Those profits easily could have topped $100 million — and the majority of that windfall would have gone to Stanley Morgan.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
Comments are currently unavailable. Please check back soon.