It has been revealed that Facebook, which was floated on the stock exchange lately, is under investigation after allegations were made that investors were misled as to the true valuation of the company.
In the three days since Facebook was first floated, it has seen its share price drop an amazing 18 per cent and it has now been announced that Morgan Stanley has received a subpoena from authorities in Massachusetts while the flotation is also likely to come under scrutiny from the SEC (Securities and Exchange Commission).
The investigation follows accusations that Morgan Stanley was aware that the stock price would plummet and deliberately kept some investors in the dark regarding forecasts, informing major investors of potential problems while failing to disclose the information to smaller ones.
Shares were initially priced at $38 per share but the Facebook CEO sold 30.2 million of his shares when the price reached $37.58 netting $1.13 billion, while Peter Thiel, Facebook director, also sold some 16.8 million shares making a total of $633 million. Some industry experts have warned that the share price could continue to fall to as low as $10 per share while others have predicted that it will return a position closer to its opening price.
Mary Schapiro, Chairman for the SEC, said, “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.”