BUSINESS
05/23/2012 08:04 am ET

Facebook IPO Leads To Stock Collapse, Legal Headaches: Seven And A Half Things To Know

Thing One: Welcome To Facebook's Nightmare: The Facebook IPO has quickly turned from a mild embarrassment into a five-alarm nightmare.

While hundreds of millions of shares of Facebook have changed hands, at ever-falling prices, nearly as many pieces of legal paper have been served, too, with more certainly to come. Massachusetts subpoenaed Morgan Stanley, looking for information about a Reuters report that only some investors were informed of revenue-forecast cuts just ahead of the IPO. An investor sued exchange operator Nasdaq OMX over botching the IPO, and Nasdaq's head of transaction services said the IPO would not have gone forward, had the exchange known how badly it would be wracked by technical difficulties.

Let's see, what else? Securities and Exchange Commission Chairman Mary Schapiro said her agency would be looking into the deal, and a Los Angeles law firm filed a lawsuit seeking class-action status against Facebook and its underwriters, Reuters reports. All the while, the stock has plunged 18 percent from its IPO price in less than three full trading days. That may actually be the good news about this story: The market seems to be taking a rational view of Facebook's prospects. But that could mean the stock falls a lot harder -- Michael Wolff suggests the company is actually doomed in the long run. And nothing will change how destructive this whole debacle has been to already weak public trust in our financial markets.

Thing Two: Stormy Summit: If it's Wednesday, it must be time for another summit of European leaders to talk about crisis stuff. It's already off to a bad start, with Germany shouting "Nein, nein, nein" to the idea of common euro-zone bonds, which would create a tighter European fiscal union but also maybe punish Germany, which currently enjoys far lower borrowing costs than any of its partners. Meanwhile, the Bundesbank sternly warned Greece to get its act together or hit the bricks. Little wonder markets around the world are falling this morning, on doubts today's summit will get anything done, Reuters writes.

Thing Three: The Wages Of Lobbying: If there's one thing the financial industry is actually good at, it's lobbying like crazy to keep regulators out of its business. Maybe too good! Bloomberg points out that the MF Global collapse and JPMorgan's recent multi-billion-dollar trading losses in credit derivatives could have been avoided if the rules that MF Global and JPMorgan hated had actually been in place. The Huffington Post has noted something similar in the past. Anyway, the banks needn't blow so much money on lobbying -- especially JPMorgan, which despite its cash has few Republican friends in Congress, the Wall Street Journal reports. The truth of the matter is that the cops on their beat are woefully underfunded anyway, as SEC chief Mary Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler told a Senate hearing looking into financial regulations and the JPMorgan debacle.

Thing Four: Defending, Sort Of, Private Equity: How do you solve a problem like private equity? How do you hold a moonbeam in your hand? That's what both President Obama and Willard Mittens Romney are wrestling with in the presidential race, the Washington Post writes, with Obama wanting to criticize Romney without chasing away the private-equity industry's sweet, sweet campaign cash. Romney wants to tout his business credentials while ignoring the fact that his business mainly involved picking clean the carcasses of dead companies. An Obama surrogate, former private-equity weasel Steven Rattner, takes to the op-ed pages of The New York Times to say private equity is awesome, but not as awesome at creating jobs as Mittens says it is.

Thing Five: Taxmageddon Warning: The Congressional Budget Office warned on Tuesday that a bunch of tax increases and spending cuts scheduled to take effect at the start of 2013 -- what's known as the "fiscal cliff" -- would starve the economy of more than $600 billion and cause a recession in the first half of the year. But we're sure Congress will be responsible about this and fix everything in time. Oh, wait.

Thing Six: Prepaid Protections: The government's new consumer-finance watchdog, the the Consumer Financial Protection Bureau, is expected today to propose new rules for prepaid debit cards, The New York Times writes, "a largely unregulated product that is flourishing even amid concerns about high fees and poor disclosures."

Thing Seven: Stryker Down: Say you're a healthy, red-blooded American male CEO of a company with the awesome name Stryker, and you're going through a divorce and want a little sexytime with somebody that worked for the company. Lesser men in that situation would just go for it, consequences be damned, but Stryker's CEO actually got the board's permission to start the romance, and his new lady friend actually left the company at the board's suggestion so they could start getting it on. And then the board canned the CEO anyway! The Wall Street Journal has all the juicy details. Well, not all. Because that would be kind of gross.

Thing Seven And One Half: Never Forget: Two years ago today, the "Lost" finale aired on ABC. That was also the day millions of people realized they'd wasted several evenings of the previous six years of their lives, evenings that could have been spent developing relationships, learning new skills or simply watching better shows. On some quiet nights when the moon is full you can still hear their screams of rage.

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Calendar Du Jour:

Economic Data:

10:00 a.m. ET: New Home Sales for April

10:00 a.m. ET: FHFA Housing Price Index for March

Corporate Earnings:

Before Market Open:

Toll Brothers

After Market Close:

Hewlett-Packard

Heard On The Tweets:

@EpicureanDeal: Poor Zuck. I can just imagine the awkward conversation he's had with new wife about the money he lost in the stock market

@ritholtz: If $FB breaks $30, expect to see traders w OCCUPY FACEBOOK signs around the Nasdaq . . . $$

@zerohedge: No FB class action suits yet? Lawyers are slacking

@dkberman: Since their first trade at $42, Facebook shares have shed about $11 bn - 2 Zyngas, or one LinkedIn.$FB

@ReformedBroker: $FB can't find its bottom. They should check Google Plus, the last place anyone ever looks...

@nickrizzo: It's incredible that JP Morgan's supposedly invincible but actually fatally flawed trading position was overseen by a guy named Achilles.

@Nouriel: The JP Morgan Whale joins the Goldman Sachs Vampire Squid in the great hall of deep-water and sinking financial monsters

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja

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