Material Facebook information withheld from small investors

Many things have gone wrong with the Facebook IPO (Initial Public Offering). First, Facebook increased its offering by 25% at the last minute, potentially “dooming” its chances of achieving a profit on the first day according to the Wall Street Journal. Then, Nasdaq experienced technical difficulties that caused trade executions to take hours and many investors did not know whether their trades went through. As if that wasn’t enough, Facebook quietly asked the lead underwriters of the IPO to lower their earnings estimates of Facebook. Analysts of these underwriters then passed the lower earnings estimates on to certain select large investors prior to the IPO without informing the general public. It is no wonder that several lawsuits are being filed. Below is an article from the Business Insider that addresses some of the issues with the Facebook IPO.

EXCLUSIVE: Here's The Inside Story Of What Happened On The Facebook IPO

By Henry Blodget, CEO and Editor-in-Chief of Business Insider
May 22, 2012, 5:30 PM
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And now for some more bombshell news about the Facebook IPO...

Earlier, we reported that the analysts at Facebook's IPO underwriters had cut their estimates for the company in the middle of the IPO roadshow, a highly unusual and negative event.

What we didn't know was why.

Now we know.

The analysts cut their estimates because a Facebook executive who knew the business was weak told them to.

Put differently, the company basically pre-announced that its second quarter would fall short of analysts' estimates. But it only told the underwriter analysts about this.

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