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Business Insider‘s Henry Blodget first reported that large institutional investors may have had an information advantage over individual investors ahead of the Facebook IPO. Specifically, a Facebook executive reportedly told analysts that business was weaker than initially thought. This information was then communicated to large investors, but not small investors.
Now, the Wall Street Journal is reporting a similar story on its front page.
But reporters Gina Chon, Jenny Strasburg, and Anupreeta Das also identify two of the institutions that had one up on main street. From their’ report:
Capital Research & Management wanted to buy into the Facebook Inc.initial public offering. But days before the IPO, an underwriting bank on the deal warned the big investment firm about Facebook’s dimming revenue prospects.
The Los Angeles firm, armed with information from a May 11 “roadshow” meeting with underwriters and Facebook, along with similar estimates of its own, slashed the number of shares it intended to buy.
Fidelity Investments was among big clients that were told by analysts or bank sales staff of the declining Facebook financial picture, people familiar with the matter say. The nation’s third-largest mutual fund firm expressed frustration to Morgan Stanley about Facebook valuations based on the dimming prospects for the company, the people say.
A Fidelity spokesman declined to comment.
The saga continues.
Read the whole story at WSJ.com.
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