Big Investors Named in Facebook IPO DebacleBy: Chris Gabbard - May 24, 2012
In the wake of dwindling share prices following the Facebook IPO, Facebook has been accused of sharing certain information with key investors, leaving individual investors high and dry once the share prices took a nose dive. A Facebook executive has reportedly told analysts that business wasn’t as good as they initially thought. This info was given to large investors, but not small investors.
We already know the underwriters who were sued by small investors for not giving them the information. Now we know at least two investors that were given information by these underwriters. According to The Wall Street Journal, Capital Reasearch & Management and Fidelity Investments, either backed out, or expressed concern over the new number they were given:
Capital Research & Management wanted to buy into the Facebook Inc. initial public offering. But days before the IPO, an underwriting bank on the deal warned the big investment firm about Facebook’s dimming revenue prospects.
The Los Angeles firm, armed with information from a May 11 “roadshow” meeting with underwriters and Facebook, along with similar estimates of its own, slashed the number of shares it intended to buy.
Fidelity Investments was among big clients that were told by analysts or bank sales staff of the declining Facebook financial picture, people familiar with the matter say. The nation’s third-largest mutual fund firm expressed frustration to Morgan Stanley about Facebook valuations based on the dimming prospects for the company, the people say.