Facebook Underwriters Prop Up Stock
The big pop in Facebook Inc. shares never came.
Buyers did not rush into the market to snap up shares of the social networker. And the big Wall Street banks that brought Facebook public scrambled to prevent the stock from collapsing into declines.
The underwriters averted a potential debacle by scooping up shares of the company during the Nasdaq debut. This propped up the stock, keeping it above the $38 offering price through most of the day.
“When a deal gets priced and breaks price on the first day, that’s definitely a major embarrassment,” said trader Andrew Frankel, co-president of Stuart Frankel & Co. “But it didn’t do that here - at least for the time being.”
The practice is pretty standard during IPOs, especially high-profile ones like Facebook. The big banks buy into a wave of selling as a way to prevent their customers from suffering big losses.
The syndicate of underwriters led by Morgan Stanley helped prop up shares after the Nasdaq Stock Market experienced technical problems processing trades. A number of brokerages reportedly said they were having problems trying to trade the stock.
“There are currently industrywide delays in reporting trade executions,” Michael Cianfrocca, a spokesman for brokerage Charles Scwhab, told Bloomberg News. “These issues do not appear to be unique to Schwab.”