Wednesday, November 7, 2012

Facebook Inc (NASDAQ:FB): Morgan Stanley tries to squash arbitration case

Morgan Stanley, which was the lead underwriter for the hugely messed-up initial public offering of Facebook Inc(NASDAQ:FB) in May this year, is trying to squash arbitration proceedings by an aggrieved investor who had blamed the firm for the losses she suffered in the issue.

According to the complaint filed by the investor, Uma Swaminathan, with the Financial Industry Regulatory Authority, Morgan Stanley as the lead underwriter had not informed all investors concerned that it planned to downgrade its outlook on Facebook prior to its IPO.

Swaminathan who resides in New Jersey has also named other companies such as Vanguard, Facebook, Nasdaq OMX Group and the Nasdaq stock exchanges in her complaint.

Swaminathan's is not the only complaint filed against Morgan Stanley, which is facing litigations from several investors who have more or less alleged the same things as Swaminathan.

However according to a Reuters report, a successful outcome for Morgan Stanley could be precedent for preventing other investors from using FINRA's arbitration unit as a path to resolve Facebook-related legal disputes with certain entities.

This means that it is vital for Morgan Stanley to get this case halted at the outset so that it does not become a precedent for other aggrieved investors as well.

Facebook's IPO was mired in a trading glitch with the Nasdaq stock exchange due to which investors orders could not be executed for some time.

With Facebook shares failing to hold on to its debut price of $38 a share subsequently, more investors have filed suits accusing the investment bankers involved in the issue and the company itself of hiding vital information especially with regard to its outlook.

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