Facebook and its underwriters face IPO backlash, the SEC indicates it will target VaR, and more in today’s Wall Street roundup.
Facebook flap: Research teams at Morgan Stanley and other Facebook underwriters cut earnings projections after updated regulatory filings on May 9 showed Zuck & Co. struggling to make money on mobile—and those adjusted projections put Ma & Pa Facebook Fan at a disadvantage. How’s that? The less-rosy projections, which Reuters reports Facebook urged on its investment bankers, were distributed to the big pools of money, but not to retail investors.
The Financial Industry Regulatory Authority, Wall Street’s self-regulator, says the issue bears scrutiny, and the state of Massachusetts has subpoenaed Morgan Stanley. Henry Blodget is mad.
But it appears that rules that forbid underwriters from “marketing” IPOs by widely publishing research in the weeks before an offering will give Facebook’s bankers cover. Likewise, for all the hand-wringing Nasdaq’s executives have done over Friday’s botched opening, the exchange’s plan to return $13 million to investors feels like so many small potatoes.
After all, Facebook fell to $31 yesterday, down 18 percent from its offering price, wiping out billions in market value.
Said what, when?: “Our focus is on the quality of their risk disclosure,” said SEC chairwoman Mary Schapiro at Senate Banking Committee hearings yesterday. Ms. Schapiro’s remarks indicated that the agency will focus on JPMorgan’s Value at Risk calculations, according to Bloomberg.
No fee for you: Investors such as the Harvard University endowment and Abu Dhabi are building in-house operations for real estate investment, in hopes of side-stepping fees charged by so-called pooled funds.
Patch-y feeling: Starboard Value, the activist investor waging a proxy battle for seats on AOL’s board, said that Patch, the company’s hyper-local news service, should be sold in part or whole, or closed outright. AOL CEO Tim Armstrong has promised to make Patch profitable by next year.
Cards checked: The Consumer Financial Protection Bureau is preparing new rules for prepaid debit cards, which have become a growing source of income for banks in recent years. “The people who use prepaid cards are, in many instances, the most vulnerable among us,” Richard Cordray, the consumer bureau’s director, said in a statement.
Domino effect: European banks have taken preparatory measures for a Greek collapse, but remain vulnerable to likely deposit-flight and rising defaults in Portgual, Italy and Spain in the event that Greek leaves the eurozone.
Timber!: The Ontario Securities Commission filed a fraud suit against Sino-Forest, the Chinese timber company that lost much of its $6 billion market value on the Toronto stock exchange after Muddy Waters Research published a report indicating that the company had overstated resources.