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Facebook IPO dream becoming a nightmare?

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    Senate panel reviewing stock offering amid allegations that investors were misled

  • Duration 5:22
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-- from fox at 3 o'clock FaceBook.

They're public offering was one of the most anticipated in recent history doubts among the most controversial.

If not among the biggest flops today the company is dealing with a series of negative developments lawsuits and investigations start things off.

Less than a week after its trouble -- on Wall Street.

FaceBook is being sued.

The group of shareholders claims.

That the social network and its big bank underwriters misled them.

By telling only a select few they downgraded the tech company's earnings forecast.

FaceBook representatives say that the suit is quote without merit.

But federal regulators are also looking into possible violations and a senate panel is also reviewing the situation.

Right now Facebook's stock is actually picking up a bit of steam after -- two -- plummet shares up more than a dollar on the day or about three and a half percent.

These latest developments have some analysts -- the IPO a disaster in some investors say they're furious that the price was too high and somebody should play.

So let's get to Michael -- Gerri Willis first from the business network what what's the latest on this FaceBook lawsuit here.

Well of course said the company is amber and defend ourselves vigorously here's what Andrew Noyes had to say we -- the lawsuit is without merit and we will defend ourselves vigorously.

But keep in mind last night we talked about Morgan Stanley lowering its revenue forecast.

Well now it turns out that FaceBook -- -- the analysts to lower their forecast now big questions about whether individual -- -- that access to that information just like the best clients of Morgan Stanley are there's some violations we could see your.

Well -- the answer questions we don't know but at the investigations are just getting underway the SEC Securities and Exchange Commission -- the self regulatory organization for brokers.

They're both looking into this.

Adding fuel to the fire course there were reports of Morgan Stanley made.

A hundred million dollars and -- and the other underwriters made a hundred million dollars -- profit on this deal.

So people are looking to them wondering what's gonna happen next.

-- -- you get a hundred dollars on the big last it is.

Get the lawyers went over the lawyers prosecutors are -- dollop of Cincinnati Reds Ellen plus.

-- -- -- associate editor of financial magazine Barron's -- which is owned by the parent company of this network what do you make of this might.

Well look I think you're breakdowns and every every point here but I don't know that it is necessarily violations.

-- too much stock came up at the last minute they basically made this deal bigger and priced at the high end because they thought they had demand for it.

That was apparently not the case just as people getting nervous about the revenue outlook and if this is true.

That perhaps Morgan Stanley analysts even in -- in formal projection said maybe revenues going to be softer than we thought they didn't tell everybody.

That's an issue there's a gray area here is supposed to rely only -- the documents when you're buying and this public offering.

But yet we have road shows we want to talk to these people so there could have been a problem there but the big problem to me was too much stock in a bad market priced a little bit too high.

And then there's the lawsuits Arthur.

If he documented you're supposed to base you -- you're predictions -- Six earnings are going to be a but then there -- phone calls that may shepherd.

Two special people this special one the ritual and spiritual ones that say it's actually going to be geek touching the -- it's actually the -- and the -- in the college student who bought fifty shares and that the Internet that day.

They don't have that information while then the SEC should come down on them with with all the force at all the power that they have.

-- Well that's not there and not necessarily in -- -- case I -- the FCC is regarded by many as something of a toothless tiger.

I get you remember this is not an -- that they can get people in trouble -- late it's only finds that they SS so at the end of the day that's probably what you'll see some kind of find on somebody somewhere.

Maybe not even now Morgan Stanley and maybe who knows somebody else in the process but I -- say.

Loved to have that information shared with individual investors because it's only fair right.

Do you -- -- I can't stand this heads I win tails you lose attitude we wouldn't be having this discussion.

If FaceBook it closed at 45 even assuming all of this stop -- allegedly went on.

Took place and the interesting thing is that a lot of people who say what you know what it's actually a good thing that it it didn't run because in the bubble doesn't -- so.

It pulls back.

And it's -- it's come up a little bit today may be rising a little bit tomorrow the day after that the day after that.

And it doesn't natural stream based upon people liking the companies opposed to just getting -- on what.

I think it's great I'll get rich square what we should we be having the conversation I agree with you you're right we -- we -- that was originally when made money but we should have been Davis.

People -- inside information and the rest of us did not.

We sure yeah.

That we should be having that company how come the big but how -- the rich people how come they got it adjusted.

Numbers that everyone sit at home did not yet that's.

I've always said the words inside information in Morgan Stanley would bristle quickly -- looking -- that process is probably not that different to what goes on and any in any given deal and that's right we're only looking at a hearing about it because the price could pop.

And you know look usually the bankers get blamed for sandbagging the public by pricing these things too low they go up 40% on the first day and you and I can't bikes -- 40% had -- but he also.

Look it's a little bit of an art in this process not just science terms of gauging the supply and demand.

They get rewarded handsomely from what they do at the end of the day and -- we really want to see is a fair and even playing field for individual investors so they can participate in the markets and that's what we need.

It's not what we're getting right now certainly not what we.

Thank you all.

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