Facebook IPO - has anything changed since 2001?

With this IPO, even an an old cynic like me eventually thinks "nah, now that could never happen, surely" - it does. SEC enquiries, Class action law suits....Reuters:

Facebook Inc and lead underwriter Morgan Stanley were sued by shareholders who claimed they hid the social networking company's weakened growth forecasts ahead of its $16 billion initial public offering.

......

The lawsuit claimed that the defendants, including Facebook Chief Executive Mark Zuckerberg, Goldman Sachs Group Inc and JPMorgan Chase & Co, concealed "a severe and pronounced reduction" in revenue growth forecasts resulting from greater use of Facebook's app or website through mobile devices.

It also accused Facebook of telling its bank underwriters to "materially lower" their forecasts for the company. The lawsuit said the underwriters disclosed the lowered forecasts to "preferred" investors only, instead of all investors.

......

On Tuesday, law firm Glancy Binkow & Goldberg said it filed its own Facebook lawsuit in California state court on behalf of an investor.

Nasdaq OMX Group Inc was also sued on Tuesday by an investor who claimed the exchange operator was negligent in handling orders for Facebook shares. Morgan Stanley said it is reviewing Facebook trades and would adjust prices for some retail customers who overpaid.

........

Regulators including the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and Massachusetts Secretary of the Commonwealth William Galvin are looking into how the IPO was handled. The U.S. Senate Banking Committee is also reviewing the matter.

........


Citing people with direct knowledge of the matter, Reuters this week reported that Facebook during its IPO road show advised analysts for its underwriters to reduce their profit and revenue forecasts.

It also said underwriters Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America Corp cut their forecasts after the May 9 prospectus was filed but that these cuts were not publicly revealed before the IPO.

"If Facebook faced a known and particularly salient risk, boilerplate language would be insufficient," said Elizabeth Nowicki, an associate professor at Tulane University Law School and a former SEC lawyer. "If Facebook told underwriters to lower their forecasts, it would certainly be material."

Bank of America and Barclays Plc are also defendants in the New York case, as are Facebook Chief Financial Officer David Ebersman and several Facebook directors.

My reaction to this was twofold:

Firstly, that there was a lot of very good independent comment out there saying the same thing, so investors who lost their shirts have only themselves to blame.

Secondly, reflecting on my time in the DotCom era, to wonder what - despite all the supposed "improvements" in banking systems in the last decade - has actually changed. Same drivers, same behaviours, same activities, same old same old.

And now there are even people saying the "NASDAQ Glitch" may have been engineered. Right now, I can believe anything.....

Update - US Congressional Committee tolook at IPO - Reuters:

The U.S. House and Senate committees that oversee financial sector matters are planning to look into the issues surrounding Facebook Inc's initial public offering, aides to both committees said on Wednesday.

Sean Oblack, a spokesman to the Senate Banking Committee, said the review will focus on "issues raised in the news" and that staff will be conducting briefings with "Facebook, regulators and other stakeholders."