Morgan Stanley Cut Facebook’s Revenue Estimates Right Before IPO

Posted May 22, 2012

During Facebook’s investor roadshow before the company IPO, lead underwriter Morgan Stanley delivered the news to clients that revenue forecasts were being reduced by the company. This could have been one of the reasons for the weak performance of Facebook shares between Friday and today. The $38 per share value valued Facebook at $104 billion.

“This was done during the roadshow – I’ve never seen that before in 10 years,” said an executive at a mutual fund firm that was called by Morgan Stanley. Goldman Sachs and JPMorgan Chase were also underwriters in the IPO and they revised their estimates in response to Facebook’s May 9 SEC filing. Generally underwriters in a company need to put a positive spin on negative news.

Morgan Stanley’s consumer Internet analyst Scott Devitt cut Facebook’s revenue estimate for the current second quarter significantly and cut the entire 2012 forecast.