Underwriters Score $100M in Messy Facebook IPO
Fidelity Investments, Capital Research among those warned ahead of time
By Mark Russell,  Newser Staff
Posted May 24, 2012 6:54 AM CDT
Updated May 24, 2012 7:33 AM CDT
Chart shows Facebook's stock price   (Associated Press)
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(Newser) – New investors in Facebook may be steamed (and suing) that their hot property has lost 16% of its value since the IPO Friday, but Facebook's underwriters are sitting pretty. Morgan Stanley and the other underwriters have made an estimated $100 million from stabilizing the buffeted stock, in addition to their regular IPO fees, reports the Wall Street Journal. Underwriters typically oversell an IPO by 15% in order to help them stabilize the price—they reportedly bought up some of those extra shares twice on Friday to prevent the shares turning into a loss. But on Monday, the Facebook share price fell below the IPO opening value, allowing the underwriters to buy shares at the new, lower price and pocket the difference, which worked out to about $100 million.

Of course, if you missed the memo that the Facebook IPO price was overvalued, you are not alone. Since reports surfaced that Facebook's underwriters told only a select group of large investors that the social media giant was overpriced, the Journal has dug up the names of some of those lucky insiders, including Capital Research & Management and Fidelity Investments. The "lackluster" Facebook deal "has illustrated that pockets of the financial world remain firmly stacked in favor of the market's biggest players," according to the Journal's analysis.