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Tuesday, May 22, 2012

Facebook’s IPO: Morgan Stanley’s Conflict of Interest

Morgan Stanley’s underwriting of Facebook’s IPO has been thought by some of the bank’s rivals to be incompetently managed.  According to the New York Times, “(r)ival bankers and big investors have complained that Morgan Stanley botched the I.P.O., setting the price too high and selling too many shares to the public.” Interestingly, the incompetence is positively correlated with unethical policy decisions at the bank. Even as the bankers as underwriters were eager to sell lots of shares, they may have given some of their institutional customers—albeit only the most preferred, as per the bank’s other services—some privileged information. If this charge is true, the conflict of interest at the bank should be closely examined by Congress and any relevant regulators.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.