Insider trading scandal

Maybe people should have remembered how Zukerberg treated his early partners in the creation of the social networking giant.

 Cameron Winklevoss and his brother Tyler are known for co-founding HarvardConnection (later renamed ConnectU) along with Harvard classmate Divya Narendra..,.considered to be the precursor to Facebook.

In 2004, the Winklevoss brothers sued Facebook founder Mark Zuckerberg for $140 million, claiming he stole their ConnectU idea to create the popular social networking site.

 One of ConnectU's law firms, Quinn Emanuel, inadvertently disclosed the confidential settlement amount in marketing material by printing "WON $65 million settlement against Facebook".( http://en.wikipedia.org/wiki/Cameron_Winklevoss)

If Zukerberg was willing to stiff  the guys that brought him the idea for Facebook, why would he stop unfair dealings at that point.  The public looks like a vast sea of 'easy' money to players in the money game. The scorpion's nature is to sting...

In Wall Street terms this was a successful distibution of a stock...they are underwriters not undertakers....the sooner they get Facebgook off their books and collect their fees, the happier they are... it allows them to free up cpital to do more deals.  They thrive on doing deals but you don't want to be around when the music stops.

 

Facebook IPO engulfed by insider trading scandal

Multiple investigations and lawsuits have been announced following reports of deceptive practices and insider trading in connection with the  $16 billion initial public offering of Facebook stock.

Reuters reported that the social networking company and its bank underwriters downgraded their forecasts for the company’s earnings shortly before they increased the number of shares and raised the offering price in advance of the IPO. 

Neither Facebook nor the banks publicly announced their downgrades. The major banks involved are Morgan Stanley, JPMorgan Chase, Goldman Sachs and Bank of America.

Morgan Stanley, the lead underwriter of the IPO, is specifically accused of informing institutional investors and favored clients of its downgrade of Facebook and not telling the investing public at large.

Pump and Dump


The stench of fraud is compounded by the frenzied media hype in the run-up to the IPO, which was instrumental in inveigling small investors into what appears to have been a trap laid by Facebook and the banks.

On May 9, nine days before the IPO, Facebook filed an updated 

IPO prospectus with the Securities and Exchange Commission in which it said its revenue and earnings prospects were threatened by a disconnect between the growth of its user base and advertising volume. Its users were growing much faster than its ads business, a problem the company attributed to the rapid growth of its mobile user base.

Facebook officials personally called stock analysts at its major IPO underwriters to advise them of these negative trends. Just days before the IPO, analysts at Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bank of America lowered their forecast numbers for Facebook as a result. The banks then relayed the weaker forecasts to selected clients, one of whom reportedly was warned that second-quarter revenue could be 5 percent lower than earlier estimates.

The Wall Street Journal reported May 17 that Goldman Sachs, Tiger Global Management and Facebook director Peter Thiel, had more than doubled the volume of shares they planned to sell.
 

Forbes magazine reported Wednesday that Morgan Stanley and the other big bank underwriters made $100 million of profit by “shorting,” i.e., betting against, the Facebook IPO. 

“That’s on top of the $175 million in IPO fees the underwriting banks received for selling the deal,” Forbes wrote. 

That is $275 million in underwriting fees and trading profits betting against the shares they convinced their clients to buy...but don't feel too sorry for the clients who bought in, if they were among the sellers of Facebook shares:

The magazine added that Goldman Sachs sold $1.09 billion of Facebook stock it owned for itself and on behalf of its clients.

 

By Barry Grey
24 May 2012

Read More:
Source:
 http://www.wsws.org/articles/2012/may2012/face-m24.shtml