Facebook has another bad day*

What a mess - shares fell almost 9 percent on Tuesday, dropping to $31.00. That's about 18 percent below the $38 offering price. Today's pushback comes amid reports that analysts for two of Facebook's underwriters revised downward their forecasts prior to the offering - and the revisions were only passed along to some investors. As you might imagine, investors who didn't get the word aren't happy. The SEC is looking into who knew what, when. From the WSJ:

Morgan Stanley and Goldman Sachs Group Inc. updated their financial projections for the social network after the company added warnings to its IPO prospectus about how its user base is increasing more rapidly than the number of ads it delivers, according to the people close to the deal. That trend was blamed in part on increased use of Facebook on mobile devices, where it traditionally hasn't shown ads to viewers. Although the exact date of the analyst revisions wasn't clear, the people close to the deal said they were changed soon after Facebook updated its prospectus May 9, about a week before the offering priced.

[CUT]

Large institutions, whose interest in a stock offering is key to setting its price, would have known about Facebook's filing and the analyst revisions at least seven business days before they placed final orders for the IPO, according to people familiar with the situation. In Goldman Sachs's case, the research revision was part of an updated offering memo sent out to prospective buyers by its equity-capital-market team. The memo went to all customers who had expressed interest in buying the stock, according to a person familiar with the situation.

All this does damage not only to Facebook, but the overall stock market - another reason for individual investors to assume that the game is stacked against them.

*Update: From the NYT:

Facebook's troubled debut raises questions about the I.P.O. process. Regulators are concerned, in part, that banks may have shared information with certain clients, rather than broadly with investors. On Tuesday, William Galvin, Massachusetts' secretary of state, subpoenaed Morgan Stanley over discussions with investors about Facebook's I.P.O. The Financial Industry Regulatory Authority, Wall Street's self regulator, is also looking into the matter.