Facebook update - Tuesday afternoon / evening - well , Facebook did manage to avoid hitting the twenties today , but then it's just Tuesday . The hits keep coming and no reason to think more shares won't get flushed Wednesday morning ! Wondering whether Wednesday morning we touch the lower end of the initial price indication ( 28 or 29 ) and if so , will FB finally finally support ? Tuesday morning - 33 breached in pre-market , sharp drop at the open to a hair over 31. So , let's see whether FB can hold 31or even 30 during the trading day.....News of MS / GS and JPM reducing revenue forecasts during the roadshow to major clients getting more general traction. Monday morning - 38 support from Friday has melted away as now the new support line so far seems to be 33 ( 35 and 34 already melted away ) !

http://www.zerohedge.com/news/retroactive-market-conditions-nasdaq-says-would-have-called-facebook-ipo-if-it-knew-then-what-i

"Retroactive Market Conditions": Nasdaq Says Would Have Called Off FaceBook IPO If It Knew Then What It Knows Now

Submitted by Tyler Durden on 05/22/2012 18:07 -0400

• Capital Markets
 
• High Frequency Trading
 
• High Frequency Trading
 
• Market Conditions
 
• Morgan Stanley
 
• NASDAQ
 
• New York Stock Exchange
 
• Sigma X
 
• Sigma X

First of all, let's get one thing straight: if instead of about to breach a 20-handle, the Facebook stock price was in the $60, nobody would care about anything that happened in the past 3 days, everyone would be happy and delighted, and increasing the velocity of money with the comfort that some greater fool would be willing to pay even more for ridiculous overvalued ponzi, pardon, portfolio holdings. Alas, we are not there, and as a result, the fingerpointing phase has come and gone. Now come the lawsuits, because people, led to believe in huge short-term profits, are now faced to face with a grim sur-reality in which the tooth fairy was just exposed as the cookie monster. And the latest farcical development: Nasdaq finally pulling market conditions, but not just any market conditions - retroactive ones.

As the WSJ reports: "A senior Nasdaq Stock Market official told customers Tuesday afternoon that it would have pulled the plug on Facebook Inc.'s initial public offering had it known the full extent of the technical problems that plagued its systems. On a conference call with brokers after Tuesday's close, Eric Noll, head of transaction services, said the exchange "by no means would have gone forward" with the much-watched Facebook debut if it had known problems would disrupt a "normal trading day." "In retrospect, it was incorrect," Mr. Noll said of Nasdaq's interpretation of problems." At this point every plaintif's bar attorney eyes just lit up, because what Nasdaq just admitted was liability. And every single retail investor who has lost money, which would be everyone who has bought and held as the stock closed at a fresh all time (read 2.7 day) low, will now demand that had they known what the Nasdaq pretended not to know, but now knows, they would not have put that limit $43 buy order. In the meantime, the actual stock price of Facebook will flounder as the stock becomes a whipping boy if not for investors, then for attorneys everywhere.

More from the WSJ:

Nasdaq said it can't promise customers they will be compensated for losses due to its IPO system failures.

We don't ultimately know whether everyone will get a dollar on the dollar," Mr. Noll said, saying the ultimate payouts will depend on regulatory approval and sign-off from Nasdaq's own board.

The exchange operator has been in touch with Facebook since the IPO blunder last week, according to Mr. Noll, and those conversations were "ongoing," he told brokers on the conference call.

When asked why Nasdaq hadn't tested for the high levels of order cancellations that it said drove the technical problems with Facebook's IPO opening, Mr. Noll said on the conference call that exchange officials believed they had sought to address such potential issues.

We'll give the Nasdaq one thing though: unlike everyone else in this day and age, whose primary recourse is to scapegoat, and to deflect blame, Nasdaq refused to bash that one whipping boy for all things market structure (which Zero Hedge first warned about over 3 years ago): high frequency trading.

High-frequency trading firms, known for the heavy burden they place on exchange systems, played no role in Nasdaq's problems opening up Facebook's shares for trading Friday morning, Mr. Noll said on the conference call. Most such firms do their trading after stocks open on the broader U.S. markets, Mr. Noll told member firms, and there were no signs that any were active as Nasdaq struggled to match up buy and sell orders to form the opening trade in Facebook.

Sadly, something tells us that the final outcome of this debacle will be the end of the Nasdaq which will soon be BATS'ed out of existence, but not due to faulty algos originating on the NYSE or Sigma X, but because the firm will soon be sued to liquidation.

Which a world in which virtually no retail investors are left, is probably very much overdue.

* * *

Still why didn't Nasdaq, or Morgan Stanley,do pull a "market conditions" on Friday? Here is how we laid it out.

zerohedge@zerohedge

Some HFT firm will go out of business today

18 May 12

In retrospect, the current outcome will likely turn out even worse for investors' faith and sentiment in the farce known as the capital markets.

and....

http://www.zerohedge.com/news/facebook-maginot-histogram-here-how-morgan-stanley-just-gave

The Facebook Maginot Histogram - Here Is How Morgan Stanley Just Gave Up

Submitted by Tyler Durden on 05/22/2012 16:58 -0400

• Morgan Stanley
 
• NASDAQ
 
• Price Action

Update: well, our feeling was correct:

• MASSACHUSETTS SUBPOENAS MORGAN STANLEY OVER FACEBOOK
• MASSACHUSETTS SEEKS MS COMMENTS TO INSTUTIONAL INVESTORS ON FB
• MASSACHUSETTS SUBPOENAS MORGAN STANLEY OVER FACEBOOK COMMENTS

It is by now well-known that certain large banks were heavy defenders (by mandate and then by sheer panic) of the Facebook share price post-IPO. Margin Stanley appears to have been the name of choice for this defender, and by dint of primary greenshoe allocation, and today's price action suggests that whether it was them or not - whoever it was just gave up their undying defense. The following volume profile (how many shares were traded at each price point since the share's release) illustrates dramatically the massive bid-side presence (remember there are no short-sellers per se) as they defended first $42 (78mm shares bid), $41 (11.6mm shares bid), $40 (18.4mm shares), $39 (3.9mm shares), $38.50 (6.5mm shares), and finally $38 (22.7mm shares bid) before the first day or two were over. This is at least 140mm shares that were bid for above the volume-weighted average price of $37.98 across all 844mm trades that have occurred since Facebook began trading on NASDAQ. $32.1bn of trading volume across the three days. It appears that today's action - which seemed to be left undefended as algos were in charge was the breaking point for MS.

Think of the green arrow (oval) as the pivot on the teeter-totter of volume - which is now volume-weighted at almost perfectly the IPO price...

Next, for all the extended debate in the media and the blogosphere of the simple concept of a Greenshoe it becomes painfully clear that virtually nobody in the financial media space has even opened one chapter of a Series 7 book (and certainly not done a refresher course). No matter: the math is simple: if MS was the bid at or above $38 on a VWAP basis, and as the chart above shows they clearly were, they lost money using a reference synthetic "short" basis of $38, if they defended more than 15% of the float, i.e. bought more than 15% of the 484mm shares issued.

For all those who are naively assuming that just because the stock price has plunged, that MS can make money because it had a parallel short as it was IPOing: wrong. MS does not have a right to pocket the upside, and merely the cash proceeds to the company are less. As to whether and how much pain MS has taken, we will have to wait until the June 30 press release, or some ad hoc JPM-esque press conference.

Finally, our first tweet today was the following. We hope some enterprising lawyer will not disappoint us:

zerohedge@zerohedge

Will Facebook set the record for shortest time from IPO to shareholder class action lawsuit? We may find out today

and....

http://www.businessinsider.com/massachusetts-is-subpoening-morgan-stanley-over-facebook-2012-5

Massachusetts Subpoenas Morgan Stanley Over Facebook

Jay Yarow | May 22, 2012, 5:15 PM | 1,451 | 14

• inShare15
•  
•  
• A A A

MSMay 22 05:19PM
13.32	Change +0.13	% Change +0.99%

FBMay 22 05:19PM
30.85	Change -3.18	% Change -9.34%

See Also

BOMBSHELL: Facebook Bankers Secretly Cut Forecasts For Company In Middle Of IPO Roadshow

EXCLUSIVE Q&A: Hedge Funder Who Bet $100 Million On The Facebook IPO Just Called And Boy Was He Furious

More bad news for Facebook and its lead underwriter, Morgan Stanley.

Massachusetts Secretary of Commonwealth is subpoenaing Morgan Stanley over the issue of analyst disclosures, Reuters reports.

Reportedly, Facebook and Morgan Stanley told clients that Facebook's business was not going to be as strong as expected. It did not disclose that publicly, though.

If this is true it's trouble for both companies.

Read more: http://www.businessinsider.com/massachusetts-is-subpoening-morgan-stanley-over-facebook-2012-5#ixzz1vdtDfV37



http://www.zerohedge.com/news/facebook-all-time-lows-27-highs

Facebook At All-Time Lows; -27% From Highs

Submitted by Tyler Durden on 05/22/2012 08:36 -0400

• Morgan Stanley
 
• Reuters

1.8mm shares have traded this morning as the long-selling continues as the stock-that-shall-not-be-named traded as low as $32.70 this morning (from its $45 highs on Friday)...

Not helping matters is the Reuters reportthat:

"Morgan Stanley unexpectedly delivered some negative news to major clients: The bank's consumer Internet analyst, Scott Devitt, was reducing his revenue forecasts for the company. The sudden caution very close to the huge initial public offering, and while an investor roadshow was underway, was a big shock to some, said two investors who were advised of the revised forecast."

Cue the shareholder class-action lawsuits.

http://www.zerohedge.com/news/facebook-ipo-post-mortem-dummies

Facebook IPO Post-Mortem For Dummies

Submitted by Tyler Durden on 05/21/2012 17:30 -0400

Over the weekend we presented a very sophisticated, bottoms-up, trade-level analysis of the Facebook IPO debacle courtesy of Nanex. Now that the $38 underwriter-supported price has been breached with gusto, and absolutely anyone and everyone who bought into the Facebook IPO and still holds the stock as of market close has suffered major losses, here is a far more simplified, grass-roots, animated Facebook post-mortem for the 'rest of us'... many of whom likely are nursing 10-20% losses in the span of 48 hours.

http://www.zerohedge.com/news/facebook-under-38-artificial-underwriter-support-ends

FaceBook Under $38 As Artificial Underwriter Support Ends

Submitted by Tyler Durden on 05/21/2012 08:14 -0400

• Morgan Stanley
 
• NASDAQ

About Face(book) took all of 24 hours. The FaceBook $38/share support freebie courtesy of Morgan Stanley is now gone. As of moments ago the stock was well below its IPO price and sliding. The humiliation for a Zuckerpunched Morgan Stanley, which is now funding its $70 million IPO fee with hundreds of millions in sales and trading losses, and which is scrubbing any mention of the FaceBook IPO from its pitchbooks, and of course the NASDAQ, is just soaring by the minute.

and...

http://www.zerohedge.com/news/few-more-facebook-numbers

A Few More FaceBook Numbers

Submitted by Tyler Durden on 05/21/2012 08:31 -0400

Up until 26 minutes ago, $38.00 was the most important number for Facebook. That is no longer the case. Below, courtesy of Grant Stevens and Things That Make You Go Hmm are a few more numbers that readers may be interested in.