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The Warning Signs Behind Facebook's Flop

Tuesday, 22 May 2012 | 2:38 PM ET
Mark Zuckerberg
Getty Images
Mark Zuckerberg

Facebook shares have plummeted since the company began its much-anticipated life as a publicly-traded firm last Friday.

While trading glitches at the Nasdaq on the company’s opening day are widely seen as contributing to the sell-off, the stock’s lingering shortcomings are raising questions about whether or not lead underwriter Morgan Stanley (along with other banks) misgauged the demand, and the price of the deal.

Were Facebook Insiders Clued In?
CNBC's Bertha Coombs explains a timeline of Facebook's plunge post-IPO. Alistair Barr, Reuters reporter, shares perspective on Morgan Stanley's cut on Facebook during its roadshow.

Tuesday comes new revelations that analysts at these firms (Morgan Stanley, and likely others) were reducing estimates about Facebook’s financials at the same time their IPO colleagues were upping the size and price range of the IPO.

The question now turns to: what did these underwriters know, when did they know it, and which investors were told?

-By CNBC's Jesse Bergman and Bertha Coombs
@jbergmancnbc & @coombscnbc


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