Facebook Inc (NASDAQ:FB) has been under the noses of the SEC in the recent past, following an inquiry launched to investigate the company’s pre-IPO practices with regard to the pricing of the stock. The botched IPO saw investors lose nearly 50% of their initial investment in the social networking giant, while others were quick to cash in before the losses escalated.

Facebook IPO, Nasdaq

However, the latest news, as covered by Lee Spears and Vivien Lou Chen, of Bloomberg, indicate that its not just the SEC that was digging up information on Facebook Inc (NASDAQ:FB)’s controversial IPO. The Federal Reserve Bank of New York, economists are said to have discovered that Facebook Inc (NASDAQ:FB)’s underwriters may have spent an estimated $66 million supporting the stock’s price in the first day of trading, after the company’s initial public offering.

The underwriters are believed to have placed bids of $38 and $40 per share, during the first day of trading to prevent the stock price from falling below its offer value at its debut. The economists also expressed that the cost of supporting the stock from plunging might have cost the underwriters about 40%, a value equivalent to 40% of the underwriting commissions. Among the banks believed to have lost a huge chunk of the commissions paid to them to take the company public, is Morgan Stanley (NYSE:MS), the lead underwriter of the $16 billion Facebook Inc (NASDAQ:FB) IPO.

The economists are noted to have written, “if this estimate is correct, underwriters’ reputational concerns and obligations to the firm may have outweighed their short-run profit motive”. Morgan Stanley (NYSE:MS) was also responsible for placing bids in the open market to prevent the price from falling below the $38 mark for the social networking giant. This was noted by Bloomberg, who cited a source familiar with the issue.

However, the article also notes that, Mary Claire Delaney, a spokeswoman for the New York-based bank, declined to comment on the economists’ analysis.

Facebook Inc (NASDAQ:FB)’s IPO was marred by all sorts of controversies, including an opening day 30 minute technical glitch at the NASDAQ stock exchange (NDAQ), and resulted in huge losses for some companies. Switzerland’s UBS AG (NYSE:UBS) was also among the losers, along with several other private equity firms, and individuals.