Facebook's IPO whodunit

As Facebook's stock started its first week of trading, there were some startling allegations as to why the stock was tanking.

Facebook itself may be responsible for investors' tepid response to the social network's stock, which has been mostly falling since it went public on May 18. (As of Friday morning, Facebook shares were bouncing around the $32 level, down about 16 percent from the $38 IPO pricing.)

Initially, it looks like Morgan Stanley, the lead underwriter on the massive offering, was to blame for allegedly telling major clients it had reduced its revenue forecast for the company, scaring off many big investors in the days leading up to the IPO. But no one knew why Morgan Stanley -- as well as JPMorgan Chase and Goldman Sachs, which also served as major underwriters for the deal -- would revise their estimates so close to the largest tech offering in history.

Then came word that the underwriters cut their estimates because a Facebook executive instructed them to. A source tells Henry Blodget at Business Insider that the estimate reduction was then "verbally conveyed to institutional investors... but not to smaller investors."
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