Gorman: Investors Looking for Facebook Pop Were ‘Naive’


James Gorman took to CNBC this afternoon to talk all things Morgan Stanley and Facebook.

Ross Mantle for The Wall Street Journal

The CEO defended his bank’s role in the controversial IPO and said the bank was not facing any liquidity concerns in the midst of a looming Moody’s downgrade.

Here are some highlights of his thoughts on Facebook:

Investors looking for short term pop were “naive”: Gorman said that Facebook is hoping to “establish a long-term investor base,” and he hopes that such buyers haven’t panicked as Facebook is in a “volatile period.” And to those looking for that quick pop, Gorman said ”you’re naive” and “you bought under the wrong pretense.”

A “potent elixir” mixed up trouble: “Buyers and sellers didn’t know what they were getting…That confusion in, frankly, a deal of almost unprecedented size against a macro backdrop…created a…potent elixir, if you will, that really set this thing aflame.”

On retail allocation: Retail investors were given 26%, Gorman said, in line with the Journal’s reporting. Gorman said this wasn’t entirely out of the ordinary, citing offerings from GM and Kraft, which he said also had lots of retail demand.

On raising the offering’s size: Gorman said the decision to increase the offering size, here by 25%, wasn’t “terribly unusual.” He also said the deal had “unprecedented retail demand” at Morgan Stanley.

(Despite Gorman’s remarks about the share-increase size, in fact it’s terribly unusual to both raise the size of the deal and the price to a new range. In the 4,674 U.S.-listed IPOs to price since 1995, only 3.4% have dared to raise the expected range and the amount of shares, according to Dealogic. One was GM, which Gorman referenced several times.)

Don’t give up hope yet: ”This is an American celebration…the story isn’t over…we have to be a little patient…We just all need to settle down a bit, get to the right price and get back to the fundamentals…Let’s have this conversation in 12 months.”

Facebook shares jumped 5% Thursday in a strong rebound from the day’s lows, a move Gorman was eager to tout. Still the stock his bank led into the public markets has ended its first two weeks as the worst large IPO in history. Down 22% from its IPO price, no other IPO that raised at least $1 billion has done worse for that time period, according to Dealogic.


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