(CBS News) Facebook is all about sharing information, but it turns out that banks did not share all they knew about the company before investors spent billions on its stock -- stock that has been falling in value since they day it went on sale.
Shares of the social network lost nearly $3 Tuesday to close just over $31. The stock was supposed to be priced so it would go up, but it hit the market at $38 and now it is down 18 percent. The company's value has plummeted from $104 billion to less than $67 billion -- a loss to investors of more than $37 billion so far.
Two weeks ago, while Facebook founder Mark Zuckerberg was out touting his new stock, and the banks backing the deal were raising the offering price, some of those same banks were quietly cutting revenue forecasts for the company.
At Morgan Stanley, the lead firm on the offering, an analyst, reportedly Scott Devitt, sent out a cautionary note that Facebook's outlook was weakening -- but only to a select group of the bank's top clients.
Max Wolff, an economist and senior analyst with Greencrest Capital, said Tuesday that this "absolutely" should not have happened.
"There is no debating this is a misadventure of epic proportion," Wolff said.
The issue, Wolff said, is that Morgan Stanley didn't tell everyone.
"It's either everyone or no one. And if there are some voices of skepticism -- especially seeing how things have gone -- I think everyone should have heard those."
Massachusetts officials on Tuesday subpoenaed Morgan Stanley over the analyst's Facebook report. In Washington, SEC chairman Mary Shapiro said, "There are issues that we need to look at specifically with respect to Facebook."
Banks underwriting a stock offering generally are barred from issuing recommendations until 40 days after it starts trading.
"This was supposed to be the chance to restore the public's faith in the public markets and in Wall Street," said Wolff. "And instead, it's been a reminder of everything people suspected, feared or hated about the public markets and Wall Street."
Morgan Stanley in a statement Tuesday night said it acted in compliance with all applicable regulations. But one veteran of the IPO market called this a travesty. Facebook, he said, has become a laughing stock.
So, was Facebook's the worst initial public offering ever?
It may be the worst high-profile IPO we've seen, and there's been a black eye for just about everyone involved. First of all for Facebook itself; for Nasdaq, which had technical problems at the opening and now says it shouldn't have opened the stock -- it basically wasn't ready; and now the banks as well. But the biggest losers, of course, are the investors.