Facebook shares climb in early Wednesday trading

113

Facebook Inc. shares rose 3.2% Wednesday, halting a two-day losing streak, as investors continued to analyze what went wrong with the company’s initial public offering.

Facebook shares gained $1 to finish at $32, gaining back some ground after falling 19% over Monday and Tuesday. The social network, which initially was valued at $104.1 billion, is now worth about $87.7 billion.
The social network’s botched IPO continues to get scrutinized, with the latest news being that the New York Stock Exchange is trying to court Facebook’s listing from Nasdaq. Meanwhile, Wednesday’s Wall Street Journal reported that Facebook’s chief financial officer decided to raise the IPO’s offering size, at the same time bankers on the deal were lowering their estimates.
The whole mess has prompted investors to file several lawsuits, while regulatory agencies are saying they plan to examine the handling of the most heavily traded IPO ever.
Three Facebook investors on Wednesday filed a civil lawsuit in Manhattan federal court, alleging the company and its underwriters failed to properly disclose how analysts at the underwriting banks changed their financial forecasts for the company.
“We believe the lawsuit is without merit and will defend ourselves vigorously,” a Facebook spokesman said.
The secretary of state for Massachusetts also sent a subpoena late Tuesday to lead underwriter Morgan Stanley following accusations of alleged selective disclosure. Several other plaintiffs’ lawyers have said they filed suits over the offering in other courts throughout the country, seeking class-action status.
The finger-pointing comes as Facebook’s debut has proven to be the worst large U.S. IPO in the past five years. The stock lost 18% of its value over the first three days of trading, passing asset-manager Och-Ziff Capital’s debut in 2007 among IPOs that raised more than $1 billion. Och-Ziff lost 13% over its first three days.
The dramatic selloff earlier this week has led some analysts on Wall Street to defend the company, calling the market’s reaction overblown. Needham Research initiated coverage Wednesday on Facebook with a $40 price target–$2 above the company’s IPO price–calling the stock “an option on the World.”