Facebook Slides Amid Roadshow Questions - WSJ.com

This is bad news all around with all the speculative money getting drained off into this giant boondoggle!!!

Facebook Slides Amid Roadshow Questions - WSJ.com

by LYNN COWAN

Analysts for at least two of Facebook Inc.'s FB -6.61% lead underwriters revised their financial forecasts for the company while it was holding IPO roadshow meetings with investors, according to people close to the deal.
Morgan Stanley MS +2.31% and Goldman Sachs Group Inc. GS +1.89% updated their financial projections for the social network after the company added warnings to its initial-public-offering prospectus about how its user base is increasing more rapidly than the number of ads it delivers. That trend was blamed in part on increased use of Facebook on mobile devices, where it traditionally hasn't shown ads to viewers.

Although the exact date of the analyst revisions wasn't clear, people close to the deal said that they were changed soon after Facebook updated its prospectus on May 9, about a week before the offering priced.


Large institutions, whose interest in a stock offering is key to setting its price, would have known about Facebook's filing and the analyst revisions at least seven business days before they placed final orders for the IPO, according to people familiar with the situation.
In Goldman Sachs's case, the research revision was part of an updated offering memo sent out to prospective buyers by its equity capital market team. The memo went to all customers who had expressed interest in buying the stock, according to a person familiar with the situation.

Underwriters are barred by Securities and Exchange Commission rules from publicly issuing research on the IPOs they are involved in. But analysts are allowed to discuss their views with clients during these roadshows.

Goldman's customer base overwhelmingly skews toward large institutions, unlike Morgan Stanley, which also has a large individual-investor customer base.

Facebook's stock was recently trading down 4.5%. The stock lost 11% on Monday as more investors and analysts began to question the size of the company's public debut, which initially valued the company at $104 billion. The company is now worth about $90 billion, based on Tuesday's stock price.

The analyst revisions were earlier reported by Reuters, which also cited underwriter J.P. Morgan Chase JPM +5.17% & Co. as having revised its estimates.