Morgan Stanley CEO James Gorman is trying to change the perception that Morgan Stanley bungled the Facebook IPO.
He'll be on CNBC later today.
And Gorman does have several perfectly reasonable points to make, starting with the fact that Morgan Stanley got a great price for the stock of its client, Facebook, and that Morgan Stanley then gave every investor client who wanted to flip the stock the first day a chance to lock in a gain and get out.
(Facebook stock traded above the IPO price for five hours when it went public.)
In other words, Morgan Stanley helped raise $16 billion for its client and then ensured that everyone who bought the stock could come out ahead.
That's the very definition of doing an excellent job, and Morgan Stanley should be proud of that.
Alas, Morgan Stanley also played a role in hosing some Facebook investors. Specifically, Morgan Stanley did not tell smaller investors what it told big investors, which was that Facebook was having a lousy quarter. Only a few days before the IPO, Facebook called Morgan Stanley's research analyst and told him to cut his earnings estimates. Morgan Stanley immediately relayed this information to its big institutional investor clients, but didn't tell its financial advisors or smaller clients.
Thus, any smaller client who held Facebook for more than a day thinking everything was hunky dory got screwed.
What James Gorman will undoubtedly say is that Morgan Stanley followed the normal IPO procedures and rules, which it may well have. But, unfortunately, the rules themselves are grossly unfair.
(And I think it's fair to ask Mr. Gorman why Morgan Stanley did not see the unfairness of not sharing this critical information with its smaller clients and decide to change its normal procedures to do so.)
Reuters was kind enough to ask me to stop by to talk about this issue--and how to fix it--with editor Rob Cox. Video below.
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