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Bank considers compensating Facebook investors

by LLB Editor
25th May 12 3:49 pm

Morgan Stanley is planning to compensate retail investors who overpaid for Facebook’s stock in last week’s IPO, according to an unnamed source.

The global investment bank is reviewing orders placed by retail clients for stock in the popular social network and will make price adjustments for those who paid too much, the source said.

But the source, who has been reported by the Associated Press, did not disclose what constitutes overpaying for Facebook stock.

If it comes to fruition this news will be warmly received by investors who are becoming increasingly angry about Facebook’s shares fall.

But their blood pressure might be driven higher after it emerged that Mark Zuckerberg, the social network’s founder, saved £111m by selling shares early.

Some investors have decided to sue after the shares, which began at $38.23 (£24.37) a share, closed at $33.03 (£21.07) on Thursday.

This gives Facebook a market value of $90.4bn (£57.6bn), but this is $105bn (£67bn) down on the firm’s first trading day.

Facebook’s IPO had been highly anticipated, but technical problems on the Nasdaq Stock Market delayed the stock’s opening last Friday and it has been downhill ever since.

The allegation that Zuckerberg was able to profit by quick sales in the knowledge that the price would likely fall has only added to the controversy.

The term “Zucked” has even been used to describe what has happened to the investors who have taken a hit on Facebook’s share price.

It is thought that both Morgan Stanley and Facebook are facing at least two lawsuits, focusing on claims that analysts cut second-quarter and full-year forecasts for the company just before the IPO and only told a few clients.

One of the main points behind the disputes is understood to be that a “a severe reduction in revenue growth”, which has been connected to more users logging on to Facebook via mobiles than computers, wasn’t revealed.

Facebook has denied the claims, saying they are “without merit” and Morgan Stanley has not passed comment on them.

The US Senate Banking Committee has revealed that it will look into the situation, with its chairman set to decide if a public hearing is required.

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