Facebook to be sued over shares

Facebook and banks including Morgan Stanley are being sued by shareholders who claim the defendants hid Facebook's weakened growth forecasts when shares went on sale for the first time last Friday.

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US Senate reviewing 'issues' over botched Facebook stock launch

Facebook's stock launch last Friday was delayed by technical issues with NASDAQ, the American stock exchange. Credit: Facebook

The U.S. Senate Banking Committee is reviewing "issues raised in the news" regarding Facebook's botched initial public offering, a Democratic Senate Banking aide told Reuters.

The review is not considered a formal investigation at this point, but entails briefings among the committee staff and regulators, Facebook and other stakeholders.

The announcement by the committee comes on the heels of reports by Reuters that an analyst for lead underwriter Morgan Stanley cut his revenue forecasts for Facebook in the days before the offering. The IPO also suffered setbacks following a technology glitch on the Nasdaq exchange.

The aide did not provide details about what issues the committee planned to explore.

Facebook and Morgan Stanley to be sued by angry investors

Morgan Stanley is accused of selectively informing clients of a negative report about Facebook before shares started trading. Credit: AP Photo/Mark Lennihan

Facebook and banks including Morgan Stanley are being sued by shareholders who claim the defendants hid Facebook's weakened growth forecasts when shares went on sale for the first time last Friday.

U.S. regulators say Facebook's initial public offering should be reviewed, putting a spotlight on Morgan Stanley.

The financial services firm denied the accusation: "Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations. "

"Revised views [of growth forecasts] were taken into account in the pricing of the IPO," the company said in a statement.

Facebook shares close down nearly 9% on third day of trading

A TV correspondent reports on Facebook's tumbling share price from inside the Nasdaq MarketSite in New York's Times Square. Credit: AP Photo/Richard Drew

Facebook's share price closed down $3.03 or 8.9% at $31 in New York today.

In its three days of trading, Facebook's stock has dropped 18.4% from its $38 issue price.

For the thousands of investors that bought at the IPO, that's bad enough, but one analysis of its earnings prospects suggests it could get a lot worse - more like $10 a share.

Setting aside the hype and the cultural phenomenon that is the online networking site, Facebook Inc would be fairly priced at $9.59, according to the smattering of Wall Street estimates analyzed and modeled by Thomson Reuters StarMine.

Facebook shares now down to 17% below IPO price

All smiles last Friday as Facebook shares went on sale for the first time. Credit: AP Photo/Bebeto Matthews

Shares in Facebook fell again at the open today as doubts about the company's valuation increased after Reuters reported that underwriters cut their revenue forecasts for the social networking site shortly before the IPO.

Facebook's shares hit a low of $31.73, 7.4% below Monday's close, and are now trading down 17.1% down from their $38 IPO price. The shares are down 30% from a high of $45 hit shortly after they started trading on Friday.

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Some investors 25% down as Facebook shares tumble

All smiles last Friday as Facebook shares went on sale for the first time. Credit: Facebook

Facebook stock sank today in the first day of trading without the full support of the company's underwriters, leaving some investors down nearly 25% from where they were on Friday afternoon.

Shares fell $4.64 to $33.67 in the first minutes of trading. That represented a decline of more than 12% from Friday's close and about 24.4% from the intra-day high of $45 a share.

"There are real concerns about growth and advertisers' frequent lack of certainty how best to use Facebook, along with rising costs and ongoing acquisition risk," said Brian Wieser at Pivotal Research Group.

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