Banks, Financial

Banking app targets millennials who want help budgeting

Graduate debt, rent and high living costs have made it hard for millennials to save for a house, a pension or even a holiday. For Ollie Purdue, a 23-year-old law graduate, this was reason enough to launch Loot, a banking app targeted at tech-dependent 20-somethings who want help to manage their money and avoid falling […]

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Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

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Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

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Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

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RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Categorized | Capital Markets, Financial

Gorman calls Facebook investors ‘naive’

Posted on May 31, 2012

James Gorman, Morgan Stanley chief executive, dismissed outrage over Facebook’s botched initial public offering, calling investors who had expected immediate gains “naïve” for having “bought it under the wrong pretences”.

The remarks by Mr Gorman addressing Morgan Stanley’s role as lead underwriter came in a CNBC television interview on the day that Facebook enjoyed its best session since it started trading two weeks ago.

    The share price rebounded from new lows to end 5 per cent higher on a wave of buying in the last minutes of trading. The stock closed at $29.60, after 13m shares changed hands in the final 10 minutes.

    Nevertheless, Facebook has broken previous records for dollar value lost on a new flotation two weeks after its initial offering, with some $23bn, or 22.1 per cent, wiped from its $104bn original pricing, according to Dealogic.

    Its poor performance has already put pressure on other internet companies such as Zynga and Yelp and drawn criticism and regulatory scrutiny to Morgan Stanley as the lead underwriter on the offer.

    Facebook raised $16bn on May 17, after Morgan Stanley and Facebook decided to raise the offerings’ price range and the number of shares available. Those decisions have been widely cited for the subsequent slide in the stock.

    Speaking for the first time publicly about the offering, Mr Gorman defended the decision to expand the size of the deal, saying that “we had unprecedented retail demand” and “people calling in from every part of the country”. He confirmed that 26 per cent of the shares were placed in the hands of individual investors.

    He said traders should not have expected the immediate “pop” that smaller internet IPOs have enjoyed and any that did “were both naïve and bought it under the wrong pretences”.

    Mr Gorman also pinned blame on Nasdaq for sowing “confusion” on Facebook’s first day of trading due to a trading systems glitch which meant that some traders did not know for several hours whether their trades had been honoured.

    Pressure on Morgan Stanley could abate if Facebook’s stock rallies further. Mr Gorman alluded to this hope, saying, “Give this a little bit of time … We’re only on day eight here.”

    Mr Gorman also said he was “confident” that Morgan Stanley followed acceptable procedures when communicating to investors Facebook forecasts of slower growth, made just days before the IPO. The question of whether only selected clients received the information has drawn regulatory scrutiny, from the state of Massachusetts and the Financial Industry Regulatory Authority.

    Scott Sweet, senior managing partner at IPO Boutique, an investor advisory, said: “Anything that makes it seem as though it wasn’t that bad is wrong. This does not happen with deals like this. This happens with fourth-tier underwriters.”