Unlike: new Facebook blow as bank in shares launch faces inquiry

Facebook’s reputation was under threat today as the investment bank that handled its £65 billion share issue faced a major probe.

A US financial regulator issued a subpoena to Morgan Stanley over its contacts with clients before last Friday’s stock market launch.

Shares in the social networking site slipped again today following their 18 per cent price collapse since the launch.

By mid-morning they had fallen from last night’s closing price of $31 to $30.84 in pre-opening trading on the US Nasdaq market.

Traders said Facebook will find it hard to escape fallout damage from its stock market debut.

Markus Huber, a trader at City spread betters ETX Capital said: “It’s quite scandalous.”

Massachusetts secretary of the commonwealth William F Galvin said the subpoena was issued to uncover more detail about talks between a Morgan Stanley analyst and clients about a downgrade of financial projections for Facebook.

Legal experts in New York said Morgan Stanley could be accused of fraud if it was shown favoured clients received financial information that affected the share price.

Morgan Stanley said it “followed the same procedures it uses for all initial public offerings”. It added that the reduced revenue forecast was issued to all its investors “and was widely publicised in the press at the time”.

The shares opened at $38, raising $16 billion for the firm, founded by Mark Zuckerberg, who sold $1 billion worth.