Morgan Stanley and other banks that participated in the Facebook (FB) offering can't flap their gums about the company's prospects until 40 days after the initial public offering.
Today, the 40 days of biblical-seeming wandering is officially over. That means a (sorry) flood of research reports. And that means, in turn, that traders need to be careful to read between the lines.
Goldman Sachs, for example, came out with a "Buy." But take it with a mound of salt. As a lead underwriter, Goldman might be playing the role of dutiful soldier. I know, I know: there is a supposed Chinese wall separating research from investment banking. Still, it's (by remarkable coincidence, perhaps) extremely rare for a lead underwriter not to initial coverage on one of their companies with a table-pounding buy. Do they mean it? Probably not.
Like I said, you need to read between the lines here.
Morgan Stanley, another lead underwriter, couldn't muster a price target higher than the $38 offering price. That says more than their "overweight" rating.
Again, read between the lines.
Bank of America and Citigroup came out with "Neutral" ratings. They weren't lead underwriters. See how that works? In terms of reading between the lines, also keep in mind that if there is a Facebook secondary, anyone who doesn't "like" the stock -- like Bank of America and Citigroup -- might not be invited to take part.
Again, read between the lines.
Look: a lot has happened during Facebook's 40-day so-called quiet period. The economy appears to be slowing. Outrage over Facebook's botched offering might or might not trickle down to a wider movement against the social media site. Meanwhile, Facebook began placing messages from advertisers on Zynga (ZNGA), a game site. It was also big news during the offering period when General Motors (GM) pulled advertising from Facebook, interpreted as a direct slap. But GM is also shunning the Super Bowl, so who knows? Meanwhile, Ford (F) and Coke (KO) remain enamored of advertising on Facebook. Apple (AAPL), for its part, is cozying up to Facebook, while Google (GOOG), Microsoft (MSFT) and social media outlets like Yelp (YELP) and LinkedIn (LNKD) continue to kick it in the shins.
There is a lot to learn from today's round of Facebook research.
But heed this: Take nothing about Facebook from underwriters on face value.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
