Tech stocks are on a decidedly downward spiral after the Facebook IPO mutated from a highly-anticipated event into a throbbing headache for investors. As a result, tech stocks, initial public offerings in particular, will most likely be given a wide berth by those who are waiting for the things to cool down after last Friday's disaster.
In case you've been unplugged for past week or so, here's a handy recap of what's going on: Following the problematic Facebook IPO seven days ago, reports started circulating that Morgan Stanley, the firm who handled the aforementioned company's underwriting, cut forecasts before the shares went on sale. Unfortunately, only major investors were made aware of the alteration, leaving the rest of the country in the dark.
Scott Sweet, senior managing partner of the IPO Boutique, shared his thoughts on the subject with MarketWatch. "I think it will freeze the IPO market until there is some stability and some answers as to what went wrong with Facebook. IPOs, as you know, are inherently risky by nature, and here we had the ‘found money’ blow up."
Morgan Stanley, of course, claims they were in "compliance with all applicable regulations". However, that won't stop the investigation that's underway, which may ultimately alter the landscape of IPOs as we currently know it. Additionally, Nasdaq is facing scrutiny after delaying the sale for nearly 30 minutes on Friday.
Facebook shares were up to 3% on Wednesday, though they're still down 15% from their IPO price.