Facebook told forecasters to slash forecasts before IPO

Facebook told forecasters to slash forecasts before IPO

New York City : NY : USA | May 23, 2012 at 2:55 AM PDT
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Millionaire Corner Daily News Update February 1, 2012

Some days before Facebook’s IPO, analysts at Morgan Stanley and other financial firms reportedly told clients to lower their expectation about the social media giant’s prospects. Some big investors were even panicky after they were told that the 2nd quarter returns could be five percent lesser than the bank’s previous approximations.

Facebook’s negative publicity by the bank and other firms followed Facebook officials’ warning about the challenges posed by mobile advertising and then updating their bank’s analysts about the business. According to Reuters, Facebook directed forecasters to reduce revenue and earning forecasts.

The social networking giant’s decision to slash estimates was based on the feedback gained from the investor road show, which discovered that people were going for mobile devices, which produce lower advertising income.

"Facebook changed the numbers--they didn't forecast their business right and they changed their numbers and told analysts," Reuters quoted one source as saying. "The analyst's underwriters then all changed their numbers based on what management was telling them."

Investors were busy trying to digest the Facebook progress and Morgan Stanley was engaged in deciding the size and price of the stocks offering. Although some big investors cancelled their plans, others ordered large stocks. Finally, officials of the social media site and the Morgan Stanley determined they had sufficient demand and attention for Facebook to rationalize an offering price of $38 per share.

However, when Facebook went public, its shares hardly pushed up. Instead, the shares have been going down since the IPO. The stock closed at $31 on Tuesday, more than 18 percent lower than its IPO price. Facebook’s IPO was expected to be the biggest achievement of Morgan Stanley, but it turned out to be a big discomfiture, triggering questions from watchdogs about the way IPOs are executed.

“On the day of the debut, last Friday, the mood at Facebook’s campus in California and at Nasdaq’s market site in Midtown Manhattan was jubilant. Nasdaq’s chief executive, Robert Greifeld, had flown to Menlo Park, Calif., to stand by Mark Zuckerberg as he rang the bell. In New York, Nasdaq and Facebook officials had Champagne on hand to commemorate the moment,” according to a report in the New York Times.

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Facebook Inc. CEO Mark Zuckerberg is seen on a screen televised from their headquarters in Menlo Park moments after their IPO launch in New York
Facebook Inc. CEO Mark Zuckerberg is seen on a screen televised from their headquarters in Menlo Park moments after their IPO launch in New York
Kamran Ahmed is based in Seattle, Washington, United States of America, and is an Anchor on Allvoices.
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