Morgan Stanley made big bet on Facebook# Stock
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Thanks to massive hype surrounding Facebook's historic public offering, the
wager looked safe. But a rocky first day of trading has raised questions
about whether it paid off.
After a delayed start to trading, Facebook's shares spent much of the day
struggling to stay above the $38 IPO price - and ended with just a 23-cent
gain.
As a result, Morgan Stanley may have spent billions of dollars to support
the stock price by buying shares in the market. Some market participants
said that the underwriters had to absorb mountains of stock to defend the $
38 level and keep the market from dipping below it.
The firm did this by tapping into a 63 million share over-allotment option,
or greenshoe, according to sources familiar with the deal.
As an indication of the cost, had Morgan Stanley bought all of the shares
traded around $38 in the final 20 minutes of the day, it would have spent
nearly $2 billion. Underwriters are not obligated to prop up a stock on
debut, but typically do.
wager looked safe. But a rocky first day of trading has raised questions
about whether it paid off.
After a delayed start to trading, Facebook's shares spent much of the day
struggling to stay above the $38 IPO price - and ended with just a 23-cent
gain.
As a result, Morgan Stanley may have spent billions of dollars to support
the stock price by buying shares in the market. Some market participants
said that the underwriters had to absorb mountains of stock to defend the $
38 level and keep the market from dipping below it.
The firm did this by tapping into a 63 million share over-allotment option,
or greenshoe, according to sources familiar with the deal.
As an indication of the cost, had Morgan Stanley bought all of the shares
traded around $38 in the final 20 minutes of the day, it would have spent
nearly $2 billion. Underwriters are not obligated to prop up a stock on
debut, but typically do.