Investors file suit as SEC opens investigation of Facebook's IPO
POSTED: Wednesday, May 23, 2012 - 5:00pm
UPDATED: Wednesday, May 23, 2012 - 5:04pm
NBC NATIONAL NEWS — Last week's Facebook frenzy on Wall Street has quickly turned to frustration and astonishment.
"It's the worst IPO I've seen in 30 years. I've never seen anything like this actually," says CNBC host Jim Cramer.
NASDAQ blames a software glitch for the initial delays in the stock's offering on Friday, and after an under-whelming showing on that first day, the share price of Facebook stock has tumbled.
"Everybody thought there was tons of demand, but now we know that wasn't the case," says the Wall Street Journal's Shayndi Raice.
That could be because of reports that investment banks guiding Facebook's IPO process shared
negative information about the company's financial outlook with selected major clients before the stock hit the market.
"Perhaps they decided to dump their stock, which is a lot of the reason this stock has been in
free fall from the beginning," Cramer notes.
Morgan Stanley, the lead underwriter for Facebook's IPO, says its procedures complied with regulations.
Nonetheless, the financial industry regulatory authority is looking into the company's actions and the Senate banking committee is said to be preparing its own review.
Meanwhile a group of Facebook shareholders have filed a class action lawsuit against Morgan Stanley and Facebook, claiming IPO documents concealed negative information about revenue growth.
"You can't tell me there isn't one investor in that Facebook IPO who wouldn't have wanted to know that information," says attorney Sam Rudman.
A Facebook spokesperson responded "we believe the lawsuit is without merit and will defend
More than 80 million shares of Facebook stock changed hands in the first 30 seconds of