U.S. regulators are prepared to probe allegations that Morgan Stanley published negative information about Facebook ahead of the social network’s initial public offering last week. The news could have resulted in a greater number of companies deciding to sell off stock — or not invest in the company at all.
A Morgan Stanley analyst reportedly decided to cut his revenue forecast estimates ahead of the firm’s IPO, Reuters said in a report earlier on Tuesday. “This was done during the roadshow – I’ve never seen that before in 10 years,” one source told the news outlet. Morgan Stanley was one of the largest underwriters behind Facebook’s IPO and a poor forecast could have scared potential investors away from the stock. Reuters explained that underwriters are usually “barred from issuing recommendations on the stock until 40 days after it begins trading.”
The Financial Industry Regulatory Authority (FINRA) announced the planned investigation on Tuesday. “The allegations, if true, are a matter of regulatory concern,” chairman and CEO of FINRA Richard Ketchum told Reuters Tuesday.