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Morgan Stanley Cut Facebook Profit Estimate 5.9% Pre-IPO

Morgan Stanley Said to Cut Facebook Profit Projection Before IP0
The profit projection cuts came after Facebook said in a May 9 filing that advertising growth hasn’t kept pace with the increase in users. Photographer: David Paul Morris/Bloomberg

Morgan Stanley analysts lowered their 2012 projection for Facebook Inc.’s profit by 5.9 percent days before boosting the price range on the social-networking site’s initial public offering, according to people familiar with the matter.

The analysts reduced their 2012 profit projection to 48 cents a share from 51 cents, said the people, who asked not to be identified because the process is private. They also cut their 2013 profit projection to 83 cents a share from 88 cents, the people said. Investors received the new figures by phone as underwriters weren’t permitted to print anything about Facebook during the marketing period, the people said.

The cuts came after Facebook said in a May 9 filing that advertising growth hasn’t kept pace with the increase in users.

“Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs,” Pen Pendleton, a spokesman for the New York-based bank, said in a statement. “These procedures are in compliance with all applicable regulations.”

Pendleton said that Facebook’s revised S-1 filing of May 9, which added information on business trends, had been forwarded to all of Morgan Stanley’s institutional and retail investors.

“In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information,” Pendleton said in the statement. “These revised views were taken into account in the pricing of the IPO.”

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