“In the run-up to Facebook’s $16 billion IPO, Morgan Stanley, the lead underwriter on the deal, unexpectedly delivered some negative news to major clients: The bank’s consumer Internet analyst, Scott Devitt, was reducing his revenue forecasts for the company,” Alistair Barr reports for Reuters.
“The sudden caution very close to the huge initial public offering, and while an investor roadshow was underway, was a big shock to some, said two investors who were advised of the revised forecast,” Barr reports. “They say it may have contributed to the weak performance of Facebook shares, which sank on Monday – their second day of trading – to end 10 percent below the IPO price. The $38 per share IPO price valued Facebook at $104 billion.”
MacDailyNews Note: Facebook (FB) shares are currently down $1.71 (-5.02%) to $32.32.
“The change in Morgan Stanley’s estimates came on the heels of Facebook’s filing of an amended prospectus with the U.S. Securities and Exchange Commission (SEC), in which the company expressed caution about revenue growth due to a rapid shift by users to mobile devices. Mobile advertising to date is less lucrative than advertising on a desktop. ‘This was done during the roadshow – I’ve never seen that before in 10 years,’ said a source at a mutual fund firm who was among those called by Morgan Stanley,” Barr reports. “JPMorgan Chase and Goldman Sachs, which were also major underwriters on the IPO but had lesser roles than Morgan Stanley, also revised their estimates in response to Facebook’s May 9 SEC filing, according to sources familiar with the situation.”
Barr reports, “The people familiar with the revised Morgan Stanley projections said Devitt cut his revenue estimate for the current second quarter significantly, and also cut his full-year 2012 revenue forecast. Devitt’s precise estimates could not be immediately verified. ‘That deceleration freaked a lot of people out,’ said one of the investors.”
Read more in the full article here.
MacDailyNews Take: Hope poor Woz didn’t get soaked.
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