Morgan Stanley (NYSE:MS) and Goldman Sachs Group, Inc. (NYSE:GS) were the underwritters for the infamous Facebook Inc (NASDAQ:FB) IPO debacle. The lawsuit claims that investors were misled in the purchase of the IPO.
Morgan Stanley and Goldman set the offering price at $38 a share. The stock jumped at the open on Friday but soon started to fall. When the stock reached the $38 level, many in the media speculated that Morgan Stanley was buying shares of Facebook to prevent the stock from falling further.
Breaking news from the Wall Street Journal is likely to infurate investors further. Gina Chon and Aaron Lucchetti in an article just posted, state:
Morgan Stanley and other underwriters have made a profit of about $100 million stabilizing Facebook Inc. stock since trading began on Friday, people familiar with the matter said.
This is in addition to the underwriting fees of approximately $176 million, which the investment banks made from the IPO.
The article does not explain in great detail about how the firm made money from the shares.
Fleix Salmon of Reuters speculated that Morgan Stanley actually shorted more shares of Facebook Inc (NASDAQ:FB) than it bought in order to create a short squeeze and prop up the price. If this is infact what happened, as Facebook shares have tanked, that could be the reason that Morgan Stanley made money off of the IPO.
We will keep you informed with the latest updates on this story.