US Regulator Drops Probe into Facebook Deals

US Regulator Drops Probe into Facebook Deals

The Securities and Exchange Commission of the United States (SEC) has opted to discontinue its earlier investigations into the social network company Facebook Inc. over the company’s controversial initial public offering (IPO) of 2012.

This is according to a report by the social network giant given on Thursday during its quarterly report stating that the supervisory body notified them that it had terminated its inquiry, adding that no enforcement action had been recommended by the regulatory commission.

Sources report that Facebook shares had started trading on May 18, 2012, but fell thereafter below their $38 per share offering price. In addition, the shares had lost more than half their value by the middle of August that year. This turn of events eventually made investors angry with the social networking company.

It is alleged that the launch had suffered certain technological snags that delayed business activities and was responsible for the difficulty in processing trades.

Investors at Facebook Inc. also registered complaints that they had not been informed beforehand that analysts at Facebook investment banks were reducing their forecast price after learning about the company’s internal projections for promotion revenue.

They claimed they would have preferred to have the information provided to them just prior to the initial public offering by Facebook Inc.

It is reported that the underwriters did tell their large clients about the reduction but a vast majority of private investors were never tipped off regarding the same. At the stock exchange, the shares went on sale at $38 each and lost half their value within a few months.

The reports indicate that the Facebook IPO was also tainted by a NASDAQ computer problem.


Over thirty thousand Facebook orders remained held at the stock system of the stock exchange for more than two hours when they ought to have been either executed or cancelled. This left investors with a lot of questions and caused market makers to lose around five hundred million dollars.

The NASDAQ eventually paid up $10 million to settle the claims of securities law violations related to the matter.

As such, some of these investors are still said to retain hard feelings over the Facebook May 2012 IPO events.

In Facebook defense, the company’s IPO lead underwriter Morgan Stanley said that making crucial disclosures only to a few selected investors was ‘standard practice.’

There is usually no rule against brokers advising key clients concerning new information over the phone in spite of it being unlawful for the underwriters to make research on pre-IPO companies public.

The Securities and Exchange Commission apparently believes this contention, following its decision to quit its inquiries into the matter.

The removal of Facebook from SEC probe does not however affect shareholder litigation against the company and its core administration including the chief executive Mark Zuckerberg and the banks involved in the Menlo Park, California-based company’s IPO.

The litigation shall remain pending in Manhattan federal court.

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