Leading US investment bank Morgan Stanley has been fined $5 million (£3 million) by a US securities regulator for "improperly influencing" analysts ahead of Facebook's underwhelming IPO, which took place in May 2012 and was worth over $100 billion (£60 billion).
According to a Massachusetts investigation, both Facebook and Morgan Stanley failed to adequately inform investors that the popular social network's revenues were likely to be lower than forecasted in the run-up to the firm's stock market flotation earlier in the year.
Apparently, a Facebook official informed Morgan Stanley that it was anticipating lower than expected quarterly and annual results, due to an increasing number of users accessing the site from mobile devices rather than PCs. The firm warned that it had yet to implement an advertising strategy that adequately monetised its mobile platform.
Instead of informing analysts of the sub-par projections, however, senior Morgan Stanley representatives were found to have coached Facebook officials on what to say to analysts without fully disclosing expectations.
In the end, the Menlo Park-based company sold close to 421 million shares at $38 (£24) a unit, raising $16 billion (£9.8 billion) in all. However, the IPO was quickly deemed to be a failure as shares plummeted as much as 50 per cent - reaching a low of $21 (£13.25) - as concerns over the company's future profits began to surface.
Morgan Stanley did not confirm or deny the allegations made by the regulator, saying that it was pleased to have reached a settlement.
"Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws," the Wall Street stalwart stated.