Why did Facebook get off to such a rocky start on Wall Street? Well, it might have something to do with Morgan Stanley's decision to slash its revenue forecast at the last minute, Reuters reports. "This was done during the roadshow," says one mutual fund source. "I've never seen that before in 10 years." The downgrade came after Facebook revised its prospectus to warn that its revenue growth might be hampered by the public's shift toward mobile devices. "That deceleration freaked a lot of people out," says an investor.
What made Morgan's downgrade so unusual was that it was the chief underwriter for the IPO, and such firms almost always seek to paint rosy scenarios. Some are also complaining that the bank erred in increasing both the size of the offering and the price of shares just days before the IPO, adds Bloomberg. "They overplayed the enthusiasm and probably just misread the atmosphere," says one trader. Facebook shares hit a new low this morning in pre-market trading.