(CBS/AP) NEW YORK - Facebook (FB) shares took another drubbing Tuesday amid controversy over a report that investment bank Morgan Stanley (MS) reduced its sales forecast for the social networker only days before it went public.
After Facebook's stock fell below its initial public offering price of $38 a share in its first two days on the public market, it fell an additional 8.5 percent on Tuesday, down $2.91, to close at $31.12.
In the latest setback for Facebook, Reuters reported Tuesday that a Morgan Stanley stock analyst unexpectedly reduced his second-quarter revenue estimate for the Internet company during its IPO "roadshow" with investors. The change of heart occurred after Facebook had issued an amended IPO prospectus.
Morgan Stanley was one of three lead underwriters in the $16 billion IPO, prompting some financial pundits to question if Facebook had improperly disclosed the information to the firm, a potential violation of securities law.
The downward spiral has left some people sitting on big losses, and others scratching their heads. After all, nothing fundamental has changed at Facebook in the days since the much-hyped company came to the stock market -- Facebook still has more than 900 million users, its 28-year-old founder Mark Zuckerberg controls the company, and it is still one of the few profitable Internet companies to go public.
Facebook's IPO -like Netscape's in 1995 and Google's in 2004- was billed as a milestone moment. Netscape's offering ushered in the era of the Internet browser. The company's stock more than doubled in its first day of trading. Google's IPO heralded the age of search. It posted an 18 percent gain in its stock market debut. Facebook was supposed to offer proof that social media is a viable business and more than a passing fad.