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Morgan Stanley CEO: Give Facebook a 'Little Bit of Time'

CNBC.com
Thursday, 31 May 2012 | 4:39 PM ET
James Gorman
James Gorman

In his first public comments since the troubled Facebook IPO two weeks ago, Morgan Stanley CEO James Gorman told CNBC's "Closing Bell" that despite widespread criticism of his firm's handling of the stock offering, "in the room" there appeared to be enough demand to justify its $38 offering price.

He called demand from retail investors "unprecedented." Gorman said the retail share allocation was 26 percent.

In an exclusive live interview with Maria Bartiromo, he called on investors to give the stock "a little bit of time" before deciding the offering was a failure. "This is one of the most volatile openings to an IPO ever."

Gorman denied there was any "nefarious activity" connected with how it communicated a cut in Facebook's earnings estimates by Morgan's analyst just days before the offering. "There wasn't any desire to obfuscate or hide," he said, noting that the company disclosed in its public SEC filing that mobile advertising had weakened. "Over 20 news organizations," including CNBC, reported that change, he added.

Morgan Stanley's Gorman on Potential Downgrade, Facebook IPO
Morgan Stanley Chairman and CEO James Gorman discusses his company's efforts to raise liquidity amid fears of a possible downgrade from Moody's. Gorman also addresses the Facebook IPO, how parties came to agree on the listing price and the 25 percent chunk of shares allocated to retail investors.

Gorman said regulators should look at the IPO, "because it's attracted so much attention and so much hype," but he's confident Morgan followed standard procedure and didn't do anything wrong.

He acknowledged there was "enormous confusion and disarray" due to Nasdaq's problems opening trading and confirming orders.

Gorman said investors who were counting on a big first-day "pop" in Facebook's stock price were "both naive and bought it under the wrong pretenses." He said he hopes investors haven't "panicked during the flurry of the last few days," and suggested they should be "patient." "Let's get away from the fury and the frenzy of recent days" and allow the stock to find its appropriate level, he said.

Facebook ended higher today in its best daily performance since trading began.

Gorman is not concerned about losing IPO underwriting business because the firm "has a long track record" and all its people "did the right thing."

On a separate subject, Gorman also said Morgan won't have to raise any capital at all if Moody's downgrades its credit rating for the firm because it has already strengthened its balance sheet over the past few years. "We've done all this before Moody's came along."

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