Lawmakers to probe Facebook IPO

Banking committees on both sides of Capitol Hill are beginning to take a look at just what went wrong when Facebook took its stock public.

Both the Senate Banking Committee and the House Financial Services Committee said Wednesday that they were looking into the issue, although both stopped short of promising probing investigations or hearings on the matter.

{mosads}”The Banking Committee is seeking to learn more about issues raised in the news regarding Facebook’s IPO by conducting staff briefings with Facebook, regulators and other stakeholders,” said committee spokesman Sean Oblack.

A spokesman for Sen. Richard Shelby (R-Ala.), the ranking committee Republican, said his staff was also in talks with regulators and “market participants” as a matter of “due diligence.”

The relevant House committee is also taking a look at the matter.

“The Financial Services Committee is gathering information and facts about the issues surrounding Facebook’s IPO. Our staff is receiving briefings. While no hearings specifically focused on this IPO are planned at this time, the committee will have hearings over the coming weeks where this topic is likely to be raised,” said Marisol Garibay, spokesperson for the panel.

{mosads}Facebook’s Friday stock offering was one of the most highly anticipated in the market’s history, but after a number of problems, it has attracted lawsuits, subpoenas and attention from regulators.

Securities and Exchange Commission Chairwoman Mary Schapiro said Tuesday, after testifying before the Banking Committee, that regulators were looking into “issues” surrounding the stock offering.

“I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook,” she told reporters.

Reuters originally reported that analysts at Morgan Stanley had informed some clients that they were trimming revenue expectations for Facebook just days before the stock went public, which led some to believe it contributed to the company’s bleak offering. The stock has lost nearly 25 percent of its value since it first began trading among the public at $42, although it was up 2.3 percent in the middle of Wednesday’s trading.

The news spurred scorned investors to file a proposed class action suit Wednesday in federal court against Facebook, Morgan Stanley, Goldman Sachs and other underwriters. The plaintiffs argued investors had lost more than $2.5 billion since the company went public and were not informed of the trim in revenue expectations.

The state of Massachusetts is also scrutinizing Morgan Stanley, issuing a subpoena for documents tied to the IPO. The bank has defended its actions, saying it followed the same procedures with Facebook that it has with other IPOs.

The stock exchange listing the company’s stock has also come under scrutiny. The Nasdaq OMX Group has also been sued by investors after the exchange struggled to process orders in the first minutes of public trading, which was delayed roughly half an hour.