Facebook’s lead banker, Morgan Stanley, appears to have bought a huge amount of Facebook stock on Friday to try to stop the price from falling below the IPO price.If Morgan bought all the shares sold near $38 in the final 20 minutes of trading, Reuters calculates, the firm might now be the owner of 50 million shares–or $2 billion–of Facebook stock.
And if Facebook stock threatens to break through the IPO price of $38 again on Monday, Morgan Stanley will probably buy a whole lot more.
Importantly, no one really has any idea how much Facebook stock Morgan has on its books, if any. The firm could have shorted a huge amount of stock earlier in the day–selling shares it didn’t own–only to pile up “dry powder” buy shares if and when the stock threatened to break the IPO price. So, Morgan may not actually own any Facebook stock. It even conceivably could be net SHORT Facebook stock. But given the intensity of the selling pressure at the end of Friday, it seems likely that the firm owns some.
Meanwhile, Reuters says Morgan Stanley earned 38% of the overall IPO fees for placing the deal, a share that amounted to $67 million.
So, if Morgan Stanley ends up owning a bit more of Facebook, the stock would only need to drop by a dollar or two to wipe out Morgan’s share of the IPO fees.
So, everyone who hates Wall Street now has something to cheer for!
The lower Facebook goes, the more money Morgan Stanley will lose.
And if the firm really does have 50+ million shares, the losses could get big quickly.
(OK, not “big,” at least not in Wall Street terms. Stocks are so safe relative to derivatives that Facebook would have to go to zero for the loss to be BIG. But Morgan could certainly lose several hundred million dollars.)
(This, by the way, is another reason the whining and umbrage about Facebook’s small IPO “pop” is ridiculous–if Facebook’s stock keeps dropping, it’s the company’s banker that’s going to really take it on the chin.)