The mysterious person exposed Morgan Stanley fell through Facebook profit billions of dollars

Facebook listed a break, perhaps a lot of overseas fund managers this year's worst nightmare. If you read this message, it is estimated they will also depressed a while: a mysterious rebellion, Facebook's lead underwriters Morgan Stanley (hereinafter referred to as Morgan Stanley), is using Facebook shares continue to fall to make money.
Rebellion called StephenGandel and screamed on his resume, "graduated from the University of Washington, has in MoneyMagazine," Time Magazine "(TimeMagazine) and other served as writer, is currently the senior editor of" Fortune "magazine (FortuneMagazine) specializes in the investigation of Wall Street insider. "
The insider who told one of our rules of the game lies in the tip of the pyramid of Wall Street. This time, the story of the protagonist is a veteran bank Morgan Stanley.
Strange green shoe
According to Gandel Facebook share price fell to the ordinary investor losses, but this does not prevent Morgan Stanley, through its money. Facebook is listed after the break and stock prices sharply lower, Morgan Stanley in the secondary market at a lower price to buy. Buy stocks lower the price the more profit.
How to make money in the understanding of Morgan Stanley, we must first know the "green shoe" mechanism.
Green shoes are in the underwriting agreement entered into with the lead underwriter, the issuer to give the lead underwriters an option, entitling them to 30 days after the stock issuance, the issue of additional purchase from the issuer at an issue price of no more than the original issue 15% of the number of shares.
In order to ensure that to their advantage, the lead underwriter generally taken two ways: when the stock is highly sought after, the lead underwriter to the issue price, the exercise of green shoe option, over 15% of the stock acquired from the issuer to hedge its excess sale short positions in, and charge the cost of over-sale, the actual number of issued more than 15% of the original issue size; when prices decline, the lead underwriter does not exercise this right, but from the over-issued shares repurchased on the secondary market to support the price and hedge the short position, the actual number of issued with the original number is equal.
According to Gandel's, Morgan Stanley on Facebook over-allotment of 6300 shares. When Facebook listed after the break, Morgan Stanley may not exercise the green shoe option, but getting lower and lower prices to buy in the secondary market. As a result, Morgan Stanley will earn the difference between the issue price and the market price.
The Gandel particularly for example, said last Tuesday, Facebook has dropped to $ 31, Morgan Stanley and other underwriters to buy at this price than the issue price, will earn $ 450 million. According to a person familiar with the trading profits, Morgan Stanley for $ 100,000,000.
"Daily Economic News" reporter noted that as of Wednesday, Facebook to close at $ 28.19, than the issue price has fallen nearly 26 percent.
Unfair game?
Had spent seven years in the United States Securities and Exchange Commission (SEC) is responsible for the IPO supervision WalterVanDorn said that the over-allotment is well known, the SEC does not believe that the green shoe mechanism, there will be conflicts of interest of the underwriters and shareholders.
But in the IPO, some analysts have pointed out that Morgan Stanley may make profitable at the same time, the other shareholder losses. It is reported that KnightCapital file with the SEC disclosed that its trading losses between 30 million to $ 35 million, will take legal action in the future.
IPO experts said the Morgan Stanley deal does not seem to violate any provision of this practice as early as Facebook's prospectus disclosure. But for investors to buy high-priced, is still difficult to accept.
Anger some investors, in particular, on the eve of the IPO, Morgan Stanley and several other underwriters also traced in advance to certain institutional investors, such as large investment company clients to make the warning reveal worrying analysis of future income prospects on Facebook report, the investment company to withdraw in a timely manner to avoid the loss after making these in advance to get the message.
In this regard, the "Fortune" magazine senior editor AllanSloan in a discussion Who is Facebook listing of chaos in the winner's article pointed out that the news and the relationship between the player's exit, coupled with the increase in the number of shares in issue, making personal investors can buy more stock. They buy the full retail price of $ 38, after but could only watch the share price fell sharply. But now, there are opportunities to players who have previously canceled orders less than $ 30 to buy Facebook stock.