Photo: Jiahui Huang/Flickr
Thanks to a blog leak, the Facebook IPO is an even bigger disaster than previously believed.
Financial leviathan Citigroup fired star analyst Mark Mahaney over leaking confidential Facebook IPO research to TechCrunch and private YouTube forecasts to a French financial magazine, Capital. The leaks were flagged by the Massachusetts Securities Division, the state’s financial regulator, which today issued a consent order (.pdf) and fined Citi $2 million for the disclosures.
In falling casualty to the Facebook IPO, Citigroup joins lead underwriter Morgan Stanley, Facebook itself, and the Nasdaq exchange, all of whom have seen their reputations tarnished as a result of the bungled stock debut this past May. Thanks to aggressive pricing, last-minute disclosures, trading failures, and other issues, the Facebook IPO has become a sort of case study on how not to handle a large securities offering.
In the case of Citigroup, one of Mahaney’s underlings e-mailed a draft research report on Facebook to two TechCrunch writers ahead of the social network’s IPO. When one of the writers asked if the material could be published and attributed to an anonymous source, the underling responded, “my boss would eat me alive,” and asked for confidential feedback.
In a separate incident, Mahaney provided financial predictions about YouTube to a journalist working for a French financial magazine, predictions which weren’t yet available to the public.
Given that Citi took $476 billion in federal cash and guarantees to avoid going under in the financial crisis that began four years ago, the disclosures are hardly the only blemishes on the bank’s record. But they do indicate Citi still has a lot to learn about following basic market rules.