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Technology Stocks : Meta Platforms, Inc. (Facebook)

META 653.04

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Jan 9 3:59 PM EST

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To: Brian Sullivan who wrote (518)	5/21/2012 9:20:27 AM
From: Glenn Petersen	Read Replies (4) of 3790

Brian, I am still trying to understand how the Facebook underwriters could have used the over-allotment shares to support the $38 floor. Even if they were buying those shares to create the illusion that the $38 price was a firm floor, that strategy does not address the fact that they had to absorb the enormous amount of shares that were being tossed back at them. If the IPO is indeed “busted,” one would not expect to see any of the over-allotment shares purchased. We will find out in 30 days or less. In the mid-90s I was involved in a busted high tech IPO. Our units (one share, two warrants) were priced at $6.00. They traded briefly at $6.75 and closed the first day at $5.875. It was a slow downhill slide from there. We later found out that the underwriter had to absorb what they described as “wave after wave” of shares being offered for sale. When our CEO went to New York for the closing, the head of our investment bank told him that if he had a legal reason for not giving us our check, he would exercise it. There was no post-IPO dinner. I had the good sense to remain in Chicago. Oddly enough, the underwriter exercised a portion of the over-allotment for a small portion of the warrants. We never knew exactly how many shares the underwriter held, but the sliding stock price destabilized their capital structure and nine months after the IPO they gave some incentives (30% commissions) to their retail brokers to unload the shares to their unsuspecting customers. It took four years to sort out, but Nasdaq eventually brought the hammer down on the firm with suspensions and fines. They were also ordered to make their customers whole. The Nasdaq press release correctly noted that the management of the company involved had no knowledge of what the underwriter had done. Anyway, by that time the doors had been closed for some time. Hopefully, someone will eventually provide a blow-by-blow account of what happened on Friday. Regards, Glenn

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