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Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

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Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#11
post #9

Call me skeptical but I have a hard time believing that people of their calibre failed to notice that facebook's growth projections were massively overstated. I wouldn't be surprised if this was the intention all along. They knew the projections were massively optimistic and knew they'd have a watertight case (this is pure skeptical speculation) when the inevitable happened.

"Call me skeptical but I have a hard time believing that people of their calibre failed to notice that facebook's growth projections were massively overstated."

Happens pretty much all the time. That's the essence of the Greater Fool strategy: there's always someone with deep pockets who's willing to take a bad bet. Even ostensibly sophisticated investors and institutions are willing to part ways with their better senses when sufficiently excited about something.

"I wouldn't be surprised if this was the intention all along."

I think that's an overly paranoid viewpoint. It seems far more likely that a bunch of people got suckered in the IPO roadshow than a bunch of people willingly allowed themselves to get suckered in the vague hope of making it all back in a class action. Judgments in class actions are anything but certain, are often drawn out for years, and almost certainly wouldn't make up the loss on the stock.

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#12
post #9

Call me skeptical but I have a hard time believing that people of their calibre failed to notice that facebook's growth projections were massively overstated. I wouldn't be surprised if this was the intention all along. They knew the projections were massively optimistic and knew they'd have a watertight case (this is pure skeptical speculation) when the inevitable happened.

"Call me skeptical but I have a hard time believing that people of their calibre failed to notice that facebook's growth projections were massively overstated." Happens pretty much all the time. That's the essence of the Greater Fool strategy: there's always someone with deep pockets who's willing to take a bad bet. Even ostensibly sophisticated investors and institutions are willing to part ways with their better se…

It seems far more likely that a bunch of people got suckered in the IPO roadshow

Surely risk analysts are paid silly money to ignore that sort of hype and concentrate purely on the facts right?

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#13
post #10
post #7

Just to expand, the Guardian mentions this as well. In essence, the lawsuit revolves around MS and GS passing bad news round internally without publicly broadcasting it publicly - a form of insider trading. The SEC is also investigating regarding this and similar matters.

>In essence, the lawsuit revolves around MS and GS passing bad news round internally without publicly broadcasting it publicly - a form of insider trading. This is silly. The bad news for Facebook was public, before the IPO. "Did not do the research" is not a defense. http://bits.blogs.nytimes.com/2012/05/09/facebook-amends-its... http://www.cnbc.com/id/47147457 I think that the suit against NASDAQ has some merit, es…

Further, I don't even think it would have been legal for the analyst to publish their findings - if I'm not mistaken, MS and GS need to wait until IPO + 40 days before publishing anything about FB besides the IPO prospectus.

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#14
Here's the facts: the information upon which analysts reduced their estimates was publicly available. There was no secret, insider information. It was based on FB filings with the SEC. Failing to research a stock before investing is just dumb to the point where plaintiff's really should, by natural consequence, lose.

If losses are always recoverable via lawsuit or government bailout, all we do is perpetuate such gambling.

Taking no responsibility for oneself and having a deep-rooted need to find someone to blame is becoming the great American way. Depressing.

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#15
post #12

Earlier quoted context omitted.

"Call me skeptical but I have a hard time believing that people of their calibre failed to notice that facebook's growth projections were massively overstated." Happens pretty much all the time. That's the essence of the Greater Fool strategy: there's always someone with deep pockets who's willing to take a bad bet. Even ostensibly sophisticated investors and institutions are willing to part ways with their better se…

It seems far more likely that a bunch of people got suckered in the IPO roadshow Surely risk analysts are paid silly money to ignore that sort of hype and concentrate purely on the facts right?

In theory, yes. In practice, well, we all know how this story often goes. :)

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#16
post #10
post #7

Just to expand, the Guardian mentions this as well. In essence, the lawsuit revolves around MS and GS passing bad news round internally without publicly broadcasting it publicly - a form of insider trading. The SEC is also investigating regarding this and similar matters.

>In essence, the lawsuit revolves around MS and GS passing bad news round internally without publicly broadcasting it publicly - a form of insider trading. This is silly. The bad news for Facebook was public, before the IPO. "Did not do the research" is not a defense. http://bits.blogs.nytimes.com/2012/05/09/facebook-amends-its... http://www.cnbc.com/id/47147457 I think that the suit against NASDAQ has some merit, es…

No, that's wrong. The banks weren't passing those two links around, nor the facts they were based on. They were passing their own analysis, privately, to a select set of customers.

Whether that constitutes "insider trading" depends on whether or not that analysis was done based on or augmented by internal information related to their underwriting of the IPO. That's a question we can't answer, thus the lawsuit.

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#17
I don't understand this. Selective dissemination of actual business data - fine, sue their asses. But projections are guesses - guesses without any guarantees. Facebook could magically rake in a billion tomorrow, or completely shut down - "projections" aside.

Why is it that there's a legal recourse because the projections person X got were different from what person Y got?

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#18
post #3

Do lawsuits like this happen often for IPOs? Or is this something unusual?

I think lawsuits happen anytime there is big money to be made. Goldman, Morgan Stanley, and Facebook have hundreds of billions of dollars. They can settle for tens or hundreds of millions of dollars without batting an eye. That pays off for the lawyers and potentially the claimants in a life changing way.

I work in this business. Lawsuits against big banks do happen all the time for stuff like this, you are right about that. But "They can settle for tens or hundreds of millions of dollars without batting an eye." is absolutely not true.

These big banks are very aware of their legal exposure and do a lot to minimize it. A bank (even a big one) would not authorize a legal reserve in the 10s of millions without lots of people very high up in management being involved. Big reserves like this are routine, but significant.

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#19
post #5

So these people bought it at $38 or whatever. And now they've lost money because "the true facts" came out. When exactly did that happen? What's the timeline here?

As far as I know, it's this: Facebook's IPO roadshow started around May 7th. This was basically Zuckerberg and the underwriters going around and selling stock to investors. On May 9th, Facebook released an updated S-1 filing to the SEC. This was made public at the time. It's here: http://www.sec.gov/Archives/edgar/data/1326801/0001193125122... Immediately after that, the underwriters(Morgan Stanley, Goldmans, and Mer…

> updated their growth estimates downward to reflect the fact that Facebook made less money in Q1 2012 than in Q1 2011

Was that only an estimate on their own personal analysis? Or did they divulge any additional internal numbers that wasn't made public before?

Re: Morgan Stanley, Goldman Sachs Sued Over Facebook IPO

#20
post #14

Here's the facts: the information upon which analysts reduced their estimates was publicly available. There was no secret, insider information. It was based on FB filings with the SEC. Failing to research a stock before investing is just dumb to the point where plaintiff's really should, by natural consequence, lose. If losses are always recoverable via lawsuit or government bailout, all we do is perpetuate such gamb…

Not stating an opinion either way, but describing what the lawsuit is actually about here. Morgan Stanley's analyst, Scott Devitt, adjusted their estimates and they then gave that information to high-end MS customers, but not to the public. The question is whether or not MS has a responsibility as an underwriter to disclose that information to an audience broader than its own clients as material information about the company, or if they had any additional material information about the company that led them to cut that estimate.

More: http://dealbreaker.com/2012/05/even-the-underwriters-were-si...

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