Morgan Stanley Gets Subpoena From Massachusetts Over Facebook IPO

In life, the general mantra is "it has to get worse before it gets better" - but in terms of Facebook, it appears that things have to get increasingly bad before the company can see a light at the end of its virtual tunnel. As if the NASDAQ blunder wasn't enough for the social network, it's now emerged that Massachusett's Secretary of Commonwealth, William Galvin, has subpoenad Morgan Stanley for allegedly giving clients negative information prior to Facebook going public.

"The Securities Division has put out a subpoena to Morgan Stanley in connection with the analyst's discussion with certain institutional investors about the revenue prospects for Facebook," a representative for Galvin's office said on Tuesday.

"Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations," explained a Morgan Stanley spokesman in an e-mailed statement.

As the lead underwriter for Facebook, apparently Morgan Stanley is being investigated for divulging select information to its clients in that its analyst had cut his revenue estimate for the social network.

The analyst's revisions came after Facebook amended its prospectus on 9th May, which the company sent on to all its institutional and retail clients.

The Facebook saga doesn't appear to be letting up, with the company's stock dropping 9 per cent to $31 (£20) on its third trading day - and with the Securities and Exchange Commission as well as the Financial Industry Regulatory Authority calling for a review of the Facebook IPO, this is probably one life event the company won't want to feature on its new Timeline.

Source: Reuters