Facebook May, Like Morgan Stanley, Face Reg FD Challenges

Settlement documents suggest Facebook could be at fault with regard to IPO, legal experts say.

Facebook Inc., the world’s largest social-networking company, could be exposed to legal challenges surrounding its initial public offering similar to those faced by Morgan Stanley, according to legal experts.

In the first regulatory claims to flow from the May 17 IPO, Massachusetts officials said on Dec. 17 that they fined Morgan Stanley $5 million for letting its investment bankers provide research analysts specific revenue information that was not disclosed by Facebook to the general public. That broke a decade-old rule enacted after the dot-com crash to block bankers from influencing analysts, Massachusetts said.

Class Action

William Galvin, the Secretary of the Commonwealth of Massachusetts, said he didn’t have the authority to determine whether Facebook executives acted improperly.

Treasurer Calls

At 8:10 p.m. that evening, Facebook’s management held a conference call with Grimes, capital markets bankers and counsel from Facebook and Morgan Stanley. Grimes testified that he was with the treasurer on the call. Facebook, with input from Morgan Stanley, decided to update the filing.

Low End

“You can decide what you want to do with your estimates,” he wrote. “Our long term conviction is unchanged, but in the near term we see these trends continuing, hence our being at the low end of the” $1.1 billion to $1.2 billion range, the script said.

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