By Jessica Toonkel and Jennifer Hoyt Cummings
NEW YORK May 17 Morgan Stanley Smith Barney,
one of the three lead underwriters on the Facebook Inc
IPO, has increased the number of Facebook shares it will allow
advisers to allocate to each client account.
The firm previously set a cap of 500 shares per retail
client, but e-mailed advisers late on Thursday afternoon that it
had increased the limit to 5,000 shares, according to two
sources familiar with the situation, who declined to be named
because they are not permitted to speak to the press.
A spokeswoman for Morgan Stanley Smith Barney, a venture of
Morgan Stanley and Citigroup Inc, declined to
Morgan Stanley and underwriter Bank of America Merrill Lynch
started telling advisers how many Facebook shares they would
receive to allocate to clients on Thursday, hours before
Facebook announced the pricing of its IPO at $38 per share
Merrill capped the number of Facebook shares for each client
account at 2,000. Two Merrill advisers told Reuters their
offices received many more shares than expected.
Meanwhile, one Morgan Stanley adviser and one client told
Reuters they received far fewer shares than they expected.
A Morgan Stanley Smith Barney adviser based in the Northeast
who received the e-mail said he was not surprised the 500 share
cap was lifted.
But at least one adviser and one person familiar with Morgan
Stanley said it was doubtful Morgan Stanley upped the cap due to
client or adviser complaints.
"They just have a lot of stock and they need to get rid of
it," the person familiar with the situation said.
Some industry observers believe Morgan Stanley may have also
raised its cap to placate advisers and clients.
"I am sure they were getting calls," said Alois Pirker,
research director at Aite Group LLC. "One of the advantages of
being a lead underwriter is that you get preferential treatment.
I am sure there were some wealthy individuals who were wondering
if it would be better to be with Merrill Lynch."
Facebook has 33 underwriters for the IPO, led by Morgan
Stanley, JPMorgan Chase & Co and Goldman Sachs Group Inc