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Wednesday, 23 May 2012

United we stand, divided we fall in South China Sea?

The continuing standoff between China and the Philippines over the Scarborough Shoal (Huangyan Island) is a reminder that Asean needs to get its act together sooner rather than later.

THE South China Sea, spread over 3.6 million sq km, has long been a hotbed of overlapping bilateral and multilateral territorial claims.

China claims “indisputable sovereignty” over three-fourths of the South China Sea, including the Paracel and Spratly group of islands, the Macclesfield Bank and the Scarborough Shoal. Parts of the Spratly islands are also claimed by Brunei, Malaysia, the Philippines and Vietnam.

The Paracels are claimed by China and Vietnam while the Scarborough Shoal involves the Philippines and China.

What makes these claims significant, and complicated, is the real possibility that the South China Sea may contain some of the world’s most significant deposits of oil and gas. Some estimates suggest that the region may contain as much as 20-30 billion tonnes of oil or 12% of global reserves.

Earlier this year, the Philippines invited foreign companies to drill for oil in the Scarborough Shoal area. China immediately condemned the move. The People’s Daily, in an editorial, even went so far as to call for “substantial moves, such as economic sanctions, to counter aggression from the Philippines”.

China has repeatedly stated that it wants to settle these conflicting claims through peaceful negotiations. However, it has not been averse to using force when challenged; it forcibly took the Paracels and seven of the Spratly islands from Vietnam following skirmishes in 1974 and 1988, respectively.

This stands in contrast to the peaceful resolution of island disputes between Malaysia and Singapore, and Malaysia and Indonesia, through the auspices of the International Court of Justice.

Malaysia and Thailand also set a sterling example in 1979 by agreeing to put aside overlapping boundary claims in the Gulf of Thailand and jointly exploiting oil resources there, a win-win situation for both sides. A similar agreement was signed between Malaysia and Vietnam in 1992.

Territorial sovereignty can, of course, be a highly emotive issue. Nations often work themselves into a frenzy and go to great lengths to defend a pile of rock, a shoal or a frozen bit of mountain.

India and Pakistan, for example, have squared off against each other for more than 20 years over a worthless patch of ice in the Himalayas, 5,700m above sea level.

More soldiers have died of harsh weather conditions than actual combat but the madness goes on with no end in sight.

In 1996, Asean ministers, recognising the potential for conflict arising from overlapping claims in the South China Sea, agreed to negotiate a regional framework for managing the issue. It has been a difficult process.

In 2002, Asean and China managed only a joint declaration committing themselves to the peaceful resolution of their territorial disputes. It has not, however, prevented tense situations from developing as we have seen in the Scarborough Shoal.

Understandably, Asean is extremely wary of upsetting China. China has become too big, too powerful, too overwhelming to antagonise.

At the same time, Asean is also deeply divided on the question of how to respond to issues that are strictly bilateral in nature or limited to just a few of its members.

The Philippines, for example, has long pressed for a tougher Asean position in order to strengthen its hand vis-à-vis China, something that other Asean countries have been reluctant to endorse fearing it will only lead to further confrontation.

There is, in fact, a sense within Asean that the Philippines has mismanaged its handling of the issue, a view that is also shared by quite a few Filipino commentators. Now that the United States has signalled its reluctance to be drawn into the dispute, Asean leaders are hoping Manila will reassess its position.

Asean needs to realise, however, that its greatest strength in dealing with China or any one else for that matter, on this or any other issue, is its own unity and solidarity. United it stands, divided it falls.

All issues that affect regional security, whether bilateral or multilateral in nature, need to be managed together for the good of the whole Asean community.

Asean leaders must, therefore, find common purpose to help develop an effective framework to resolve these kinds of disputes.

In the end, the options, short of war, in the South China Sea are limited.

China and the Asean countries can put aside their competing claims and jointly work to exploit the resources of the South China Sea, as Malaysia and Thailand have done, or resort to international arbitration.

The former could well lead to a real zone of peace, cooperation and prosperity and cement the already burgeoning relations between China and the Asean countries. The latter is bound to leave sore losers and a divided region.

For China, a win-win solution with Asean will also undercut efforts by other powers to exploit regional fears of China in an attempt to build new alliances aimed at Beijing.

Whatever it is, the worst thing Asean and China can do is to let the issue fester.

By Dennis Ignatius Diplomatically Speaking

> Datuk Dennis Ignatius is a 36-year veteran of the Malaysian foreign service. He has served in London, Beijing and Washington and was ambassador to Chile and Argentina. He was twice Undersecretary for American Affairs. He retired as High Commis­sioner to Canada in July 2008.

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Facebook, Zuckerberg & banks sued over IPO

The lawsuit charges the defendants with failing to disclose "a severe and pronounced reduction" in forecasts for Facebook's revenue growth in the run-up to Friday's IPO.
The lawsuit names Mark Zuckerberg, Facebook's founder, as a defendant, as well as top Silicon Valley investors Peter Thiel and Marc Andreessen. Photograph: AFP/Getty Images

Facebook, Morgan Stanley and some of the biggest names in Silicon Valley are being pursued over the social network's disastrous share sale by the law firm that won a $7bn settlement for Enron's shareholders.

Robbins Geller is co-ordinating a class action lawsuit alleging that Facebook and its bankers misled investors about the true state of their business while informing a handful of privileged clients about the company's true prospects.

The lawsuit, filed in New York, names Mark Zuckerberg, Facebook's founder, as a defendant, as well as top Silicon Valley investors Peter Thiel and Marc Andreessen, and Goldman Sachs, JP Morgan and Barclays Capital.

Facebook shareholders have sued the social network, CEO Mark Zuckerberg, and a number of banks, alleging that crucial information was concealed ahead of Facebook's IPO.

The lawsuit, filed in the U.S. District Court in Manhattan this morning, charges the defendants with failing to disclose in the critical days leading up to Friday's initial public offering "a severe and pronounced reduction" in forecasts for Facebook's revenue growth, as users more and more access Facebook through mobile devices, according to Reuters, which cited a law firm for the plaintiffs. (The case is Brian Roffe Profit Sharing Plan v. Facebook, 12-04081.)

Earlier this month, Facebook updated its filings with the Securities and Exchange Commission to say that the shift to smartphones and other mobile gadgets is cutting into the prices it can set for advertisers, which would in turn hurt the company's revenue. In March, the social network had 488 million monthly average unique users of its mobile products, out of a total of just over 900 million registered users.

The plaintiffs charge that the changes to the forecast by several underwriters of the IPO were only "selectively disclosed" to a small group of preferred investors and not to the investment community at large. "The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result," the complaint says, per the Reuters report.

Facebook's stock opened Friday priced at $38 and, aside from a slight uptick right at the start, has been trading lower since then. It closed at $31 last night. In early trading today, shares are up better than three percent to around $32.
A report from well-known Wall Street watcher Henry Blodget, citing an unnamed source, posits that a Facebook executive was responsible for telling institutional investors, but not smaller investors, about the reduction in revenue estimates.

Speaking on CBS This Morning today, Blodget described the sequence of events regarding the estimates and the failure to fully share material information. "The fact that it was only distributed verbally to a handful of institutions as opposed to all investors is a problem," he said.

This isn't the only lawsuit related to Facebook's IPO. A Maryland investor, for instance, is suing the Nasdaq stock exchange over glitches in how it handled the offering.

We're reaching out to Facebook for comment and will update this story when we hear back.

Jonathan E. Skillingsby Jonathan E. Skillings 

Facebook, banks sued over pre-IPO analyst calls

In this photo illustration, a Facebook logo on a computer screen is seen through glasses held by a woman in Bern May 19, 2012. Picture taken May 19, 2012. REUTERS/Thomas Hodel

Wed May 23, 2012 11:02am EDT
 
(Reuters) - Facebook Inc and banks including Morgan Stanley were sued by the social networking leader's shareholders, who claimed the defendants hid Facebook's weakened growth forecasts ahead of its $16 billion initial public offering.

The defendants, who also include Facebook Chief Executive Officer Mark Zuckerberg, were accused of concealing from investors during the IPO marketing process "a severe and pronounced reduction" in revenue growth forecasts, resulting from increased use of its app or website through mobile devices. Facebook went public last week.

The lawsuit was filed in U.S. District Court in Manhattan on Wednesday, according to a law firm for the plaintiffs. A day earlier, a similar lawsuit by a different investor was filed in a California state court, according to a law firm involved in that case.

In the New York case, shareholders said research analysts at several underwriters had lowered their business forecasts for Facebook during the IPO process, but that these changes were "selectively disclosed by defendants to certain preferred investors" rather than to the public generally.

"The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result," the complaint said.

Representatives of Facebook and Morgan Stanley did not immediately respond to requests for comment.


Facebook shares fell 18.4 percent from their $38 IPO price in the first three days of trading, reducing the value of stock sold in the IPO by more than $2.9 billion.

(Reporting by Dan Levine in San Francisco and Jonathan Stempel in New York; Editing by Gerald E. McCormick and Lisa Von Ahn)


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Tuesday, 22 May 2012

Facebook Tumble, blame game begin !

Investors fault everything


Let the Facebook Inc. (FB) finger-pointing begin.



After one of the most anticipated initial public offeringsin history, Facebook’s 19 percent drop this week prompted investors to fault everything from Morgan Stanley’s role as lead underwriter, to the company’s greed and the Nasdaq Stock Market.

People walk by the Nasdaq stock market in New York, on May 18, 2012. Photographer: Spencer Platt/Getty Images
KSCA's Corbin on Decline in Facebook Shares  
May 22 (Bloomberg) -- Jeff Corbin, chief  executive officer of KCSA Strategic Communications, talks about the 19 percent decline in Facebook Inc.'s shares following the company's initial public offering. Corbin speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg) 

May 21 (Bloomberg) -- Paul Kedrosky, author of the Infectious Greed blog and a Bloomberg contributing editor, and Max Wolff, an analyst at Greencrest Capital Management, talk about trading in shares of Facebook Inc. Facebook fell below its $38 offer price in the second day of trading. Kedrosky and Wolff speak with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg) 

May 21 (Bloomberg) -- Darren Chervitz, research director for Jacob Funds, talks about Facebook Inc.'s stock price performance and the outlook for the social network firm. Facebook, the social networking site that raised $16 billion in an initial public offering, fell below its $38 offer price in its second trading day. Chervitz speaks with Trish Regan on Bloomberg Television's "InBusiness." (Source: Bloomberg) 

May 22 (Bloomberg) -- Bloomberg's Dominic Chu reports that after one of the most anticipated initial public offerings in history, Facebook’s 11 percent drop on Monday prompted investors to fault everything from Morgan Stanley’s role as lead underwriter, to the company’s greed and the Nasdaq Stock Market. He speaks on Bloomberg Television's "Inisde Track." (Source: Bloomberg) 

May 22 (Bloomberg) -- Cliff Lerner, chief executive officer of Snap Interactive Inc., talks about the impact of the drop in Facebook Inc.’s shares on Snap's stock. Lerner talks with Trish Regan on Bloomberg Television’s “InBusiness.” (Source: Bloomberg) 

The Facebook Inc. logo is displayed at the Nasdaq MarketSite in New York, on May 18, 2012. Photographer: Scott Eells/Bloomberg 

Facebook 11% Drop Means Morgan Stanley Gets Blame for Flop Enlarge image
A pedestrian walks past the share price for Facebook Inc. displayed at the Nasdaq MarketSite in New York, U.S., on Monday, May 21, 2012. Photographer: Scott Eells/Bloomberg
Facebook Inc. Chief Financial Officer David Ebersman, seen here, was the point person on the deal, while Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg weighed in on major decisions throughout the process, people said. Photographer: Tony Avelar/Bloomberg 

“It was like the gang that couldn’t shoot straight,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. He said he placed Facebook orders for clients. “The underwriters mis- estimated what actual demand was, and there was pure execution failure coming out of the Nasdaq.”

Taking the most heat is Morgan Stanley, said Mullaney. The bank was lead underwriter among the 33 firms Facebook hired to manage the $16 billion sale of stock. The bank decided with Facebook executives to boost the size and price days before the May 17 IPO, ignoring advice from some co-managers, said people with knowledge of the matter, who declined to be identified because the process was private. Morgan Stanley (MS) talked with few of its fellow underwriters aside from JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) throughout the IPO, one person said.

“They overplayed the enthusiasm and probably just misread the atmosphere of the marketplace,” said Keith Wirtz, who oversees $15 billion as chief investment officer at Fifth Third Asset Management in Cincinnati and bought some stock in the IPO.

Blame Game


Facebook increased the number of shares being sold in the IPO by 25 percent last week to 421.2 million and raised its asking price to a range of $34 to $38 from $28 to $35. Had Facebook kept the original terms, investors may have had a better shot at a first-day pop. Instead, the stock was little changed in its debut because Morgan Stanley intervened to prevent it from falling below the IPO price.

The shares fell 8.9 percent to $31 at the close today, after an 11 percent drop yesterday.

Just days before Facebook raised the size and price of its IPO, the company began telling analysts to lower their sales forecasts, people familiar with the matter said. Morgan Stanley analysts were among those who cut their projections during the roadshow, said one person. The move also followed a May 9 filing in which Facebook said advertising growth hasn’t kept pace with the increase in users.

Investors Misled?

Some investors say they felt misled by the underwriters. According to one London-based fund manager who asked not to be named, bankers indicated demand was so strong that he placed a bigger order than he thought he would get, leaving him with 40 percent more Facebook shares than anticipated. He sold most of that stock on the first day of trading.

The decision to boost the price range reflected the demand in the market, said a person involved in the process. Michael DuVally, a spokesman for Goldman Sachs, and Pen Pendleton, a spokesman for Morgan Stanley, declined to comment. Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment. Underwriters didn’t say how great demand was.

Morgan Stanley and Facebook consider problems with Nasdaq OMX Group Inc.’s computer systems among the reasons for the IPO’s performance so far, according to people familiar with the matter. Nasdaq’s trading platform was overwhelmed by order cancellations and updates that made the stock-market operator unable to finish the auction required to open trading. The U.S. Securities and Exchange Commission said it will review the trading.

Nasdaq Software 


Nasdaq Chief Executive Officer Robert Greifeld said on a call with reporters on May 20 about the glitch that the opening delay “had no apparent impact on the stock price,” noting the share decline began after all brokers had received confirmation about their trades in the opening auction. Robert Madden, a spokesman for Nasdaq OMX, declined to comment beyond Greifeld’s statement.

Nasdaq said in a notice yesterday it delivered all outstanding execution and cancellation messages to brokers for their IPO cross orders at 1:50 p.m. Facebook declined 5.9 percent after 1:50 p.m.

Facebook CEO Mark Zuckerberg and the early backers should be held accountable for the stock drop, said Francis Gaskins, president of researcher IPOdesktop.com in Marina Del Rey, California. Goldman Sachs, Accel Partners, Digital Sky Technologies and other existing holders boosted the number of IPO shares they offered in Facebook on May 16, a day after the company increased its price range.

‘Mispriced’ Market Value 

 

 “It’s a combination of Zuckerberg’s ego for that $100 billion market cap, and the shareholders selling who wanted an exit,” said Gaskins. “Somehow it just missed them that this was mispriced.”

Larry Yu, a spokesman for Menlo Park, California-based Facebook, declined to comment. Rich Wong, a partner at Palo Alto-based Accel Partners, and Yuri Milner, founder of Digital Sky Technologies in Moscow, didn’t respond to requests for comment.

Facebook Chief Financial Officer David Ebersman was the point person on the deal, while Zuckerberg and Chief Operating Officer Sheryl Sandberg weighed in on major decisions throughout the process, people said. At Morgan Stanley, Dan Simkowitz, chairman of global capital markets, was one of the main bankers on the offering. Michael Grimes, global co-head of technology investment banking at Morgan Stanley, also played a key role.

Underwriters did accomplish part of what they set out to do: turn paper into cash for pre-IPO holders.
“It was successful for the liquidating owners, absolutely, because they got all that and then some,” said Peter Sorrentino, a fund manager who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati.

For the investors it was a different story.

“I shame the people who were lining up to buy the thing,” said Sorrentino, whose firm didn’t buy stock in the IPO and tried to talk clients out of purchases. “The financials were there, do the math. Everyone wanted to be caught up in the glamour offering of the year. People just had stars in their eyes.”  - Bloomberg



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