Will Mr. Zuckerberg Have to Go to Washington?
It was a bad time for Facebook’s IPO to go south.
Retail investors are not happy. Class-action lawsuits have been filed against Nasdaq, Facebook and the three Wall Street investment banks that took it public. The Securities and Exchange Commission, Financial Industry Regulatory Authority and the Massachusetts Secretary of State are all “looking into” just exactly how the deal went down.
So, will that be enough to sate a scorned investment public at large, especially amid a current political climate of public skepticism — if not outright contempt — for Wall Street as a whole?
Not at all, especially because it is an election year.
Therefore, cue the tsk-tsking politicians lining up Wall Street’s powerbrokers, as well as a Facebook exec, for a session of pompous I-told-you-sos.
It’s clear the big guns on Capitol Hill are gearing up to intervene. The Senate Banking Committee is in the process of meeting with Facebook, regulators and other stakeholders in the IPO, according to a statement issued by its chairman, Sen. Tim Johnson, on Wednesday.
“Once these briefings have concluded and the staff reports back to me,” Johnson said, “I will determine if a Senate Banking committee hearing is necessary.”
Maybe not necessary, but those hearings do seem inevitably inevitable.
Sen. Sherrod Brown, chairman of the Senate Banking subcommittee, chimed in as well. “There’s a lot that we don’t know about this IPO, but a lot that we do,” Brown said in a statement released on Wednesday. “Effective capital markets require transparency and accountability, not one set of rules for insiders and another for the rest of us.”
And while the House Financial Services committee didn’t as yet return my Wednesday afternoon calls, HFS spokeswoman Marisol Garibay told Reuters that it is also being briefed on the issues, and is in the midst of “gathering information and facts.”
After the most hotly anticipated IPO of the year was mired by technological and potential ethical issues, leaving thousands of retail investors holding the proverbial bag, it’s natural that Congress would consider intervening. Allegations against Facebook and its underwriters surfaced earlier this week, claiming a Facebook executive explicitly told at least one member of its syndicate that the firms should lower their financial forecasts for Facebook at the eleventh hour, mere days before the highly anticipated IPO.
This apparently resulted in institutional investors dialing back the price at which these firms would buy Facebook stock, and that could have dampened demand for shares on the first day of trading, affecting retail investors’ chances at any potential first day gains.
Some have taken steps to ease the investor backlash. Morgan Stanley may adjust prices of orders made by its retail investor clients, according to a report from The Wall Street Journal. Nasdaq, too, may earmark around $13 million in order to resolve bad trades.
But there is nothing like a good old-fashioned grilling of money makers and Internet zillionaires for the cameras of C-SPAN to make the summertime barbeque complete.
Eat it up, folks.