Facebook IPO Raises Fairness Questions and Three Other Stories Wall Street Needs to Know This Week (5/25/2012)
by Kyle Colona on May 25, 2012
Facebook’s botched IPO continues to rain down Sturm und Drang. Part of that stress and strain comes by way of lawmakers and regulators looking for the whipping boy du jour. Against that backdrop there is a growing narrative about whether the IPO process was “fair.”
The key player in this boondoggle, according to the New York Times DealBook, is lead underwriter Morgan Stanley. Some observers highlight that taking a lower fee as deal manager in exchange for the “prestige” of bringing social networking beast to market was a bad idea. So far, the bank has lost money.
Beyond that questions are being raised over whether Morgan, along with other banks involved in the IPO shared a negative outlook about Facebook with institutional investors rather than with all investors. That said, there appears to be nothing illegal here.
No one at Facebook or any of the dealers involved have been accused of any wrongdoing. The company and its banks have yet to be charged with running “afoul” of any regulations. And though big investors may have quickly resold their shares, whoever said this game was fair?
NASDAQ in Damage Control Mode over Glitches with Facebook IPO
In a related story, BusinessInsider notes that Nasdaq has swung into damage control mode. They are hoping to brush their shoulders off over the so-called “technical glitches” that prevented a smooth operation as the IPO came to market.
Not only was trading delayed by about an hour, but there appears to have been problems with closing out trades as well. Of course, the fact that Facebook head honchos decided at the 11th hour to make another 25,000 shares available while ramping up a higher price did not help matters.
An argument can be made that had they left the deal alone, this silliness could have been avoided. As Nasdaq tries to spin this the NYSE has come a courting in a play to steer Facebook onto the big board.
All’s Quiet at Goldman’s Annual Meeting
Even though Goldman Sachs had a host of issues to address at yesterday’s annual meeting, things were relatively quiet, says the New York Times DealBook.
But shareholders had plenty on the docket. One item on the agenda was a proposal that would require the board of directors to craft a “detailed” report on lobbying. Another concern is how the Dodd-Frank reforms and the coming Volcker Rule will impact the firm’s profits.
Meanwhile some of the officers and directors were being challenged. First, Sequoia Fund managers planned to vote against James A. Johnson, a longtime director.
They were troubled over Johnson’s background. Of particular concern was his prior role as head honcho of Fannie Mae. During that time he successfully lobbied Congress to relax the GSE’s mortgage underwriting standards and lower capital standards.
There was also another challenge against Goldman director M. Michele Burns because she is also a Wal-Mart director. As has widely been reported, Wal-Mart is under the gun over a bribery scenario at the Mexico subsidiary. In the end, the firm’s compensation plan, which awarded CEO Lloyd Blankfein $12.4 million, was approved and all 10 board members were re-elected.
Euro Near 22-month Low V. the US Dollar
MarketWatch reported that the dollar briefly dropped on Thursday but that the euro was at a 22-month low against the dollar.
One overarching concern is a report from JPMorgan that the recession in Europe might push the ECB to further ease monetary policy with interest- rate cuts and another long-term refinancing operation. Such a play would push the euro down more.
One problem for the ECB and its President Mario Draghi is realizing that easing monetary policy could be a yellow flag to the markets that the euro zone is in worse condition than EU leaders and the central bank have indicated.
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Kyle Colona is a New York-based freelance writer and a Feature Writer for CompliancEX> and the Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications. You can find him on linkedin.