initial public offerings (IPOs) trading on American exchanges

Thursday, May 24, 2012

Some Big Firms Got Facebook Warning

Capital Research & Management wanted to buy into the Facebook (FC) initial public offering. But days before the IPO, an underwriting bank on the deal warned the big investment firm about Facebook’s dimming revenue prospects.
The Los Angeles firm, armed with information from a May 11 “roadshow” meeting with underwriters and Facebook, along with similar estimates of its own, slashed the number of shares it intended to buy. The night before trading began, a Capital Research manager told a banker at Morgan Stanley (MS) the lead underwriter, that the deal’s pricing was “ridiculous,” according to a person familiar with the situation. Some Capital Research fund managers didn’t buy into the IPO at all, say people familiar with the matter.
Jennifer Kohne received no such warning. The 52-year-old retired medical-device salesperson in St. Louis bought 3,000 Facebook shares Friday at $42 through an online brokerage and now sits on losses of $30,000 based on Wednesday’s closing price of $32. “We don’t get the information that these institutional fund managers are getting,” she says. “We’re at a disadvantage.”

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