We have half joked about this on Friday after a ton of the Facebook traded around its IPO price of $38 and no doubt many of the shares came back to the Street. Oliver Stone couldn’t write a better script.
Far fetched and unlikely as it is, but imagine a scenario where the leads of the Facebook IPO take down so much stock trying to protect the $38 syndicate price it puts them at risk. The markets panic as FB breaks syndicate price sending the stock into freefall. The Fed is then forced to step in and provide liquidity to these financial institutions and take Facebook stock as collateral.
Morgan Stanley’s market cap is more than double the entire size of the Facebook IPO so we wouldn’t lose any sleep contemplating such a scenario. The “green shoe” also protects the underwriters who support the syndicate price. The Chicago Tribune writes,
Had Morgan Stanley bought all of the shares traded around $38 in the final 20 minutes of the day, it would have spent nearly $2 billion. The “green shoe” overallotment, which can be used to support Facebook’s stock, is 63 million shares. At $38 per share, that amounts to $2.4 billion in firepower.
We’re not the only one thinking about the potential for a future Hollywood screenplay.