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Tuesday, 04 September 2012 09:48

Morgan Stanley in hot water over Facebook

Written by Nick Farrell



Fast and loose with client's cash

Morgan Stanley, which was the lead underwriter for Facebook’s IPO, might have been wishing it read Fudzilla.

According to the Wall Street Journal, the company invested shedloads of its clients dosh into the social notworking site. Anyone who read Fudzilla would have been aware that we had been warning our readers not to invest in Facebook because the stock was overvalued. Morgan Stanley analysts clearly don't read us or other tech sites for that matter, but perhaps they are just incredibly stupid.

For some reason the outfit decided to ignore the fact that the IPO was more than 100 times more than the company made in a year. It would have to have thought that Facebook was going to make absolute shedloads, when signs were that its profits were drying up a bit. However the company appeared to have invested more than $3 billion of other people's money in Facebook. While some other stock outfits were similarly stupid, they did not invest nearly so much.

While Morgan Stanley did have a lot of shares in Facebook before the IPO most of them were bought in May. It seems the company has learned nothing from the subprime mortgage crisis. Maybe it is hoping that the Government will bail it out again. Still we would have thought that a US senate inquiry might want to know why the overpaid Morgan Stanley crowd could not see what a small European tech magazine could.

Nick Farrell

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