Citigroup Fined $2 Million for Facebook IPO Leaks

Andrew Klips  |

The tale of Facebook Inc.’s (FB) May initial public offering unfolded further Friday as the Massachusetts Securities Division slapped a Citigroup (C) unit, Citigroup Global Markets Inc., with a $2 million fine for improperly supervising analysts that disclosed confidential information related to the IPO. Citigroup was part of the team of banks that helped underwrite the Facebook IPO. Because of the disclosure blunder, Citigroup has fired senior Internet analyst Mark Mahaney and an unnamed junior analyst responsible for information leaks about Facebook’s IPO as well as unpublished revenue estimates for Google Inc.'s (GOOG) YouTube.

Mahaney has consistently ranked in the top position among Internet analysts according to Institutional Investor Magazine.
A consent order on the Massachusetts government website said Citigroup "failed to prevent or detect the written disclosure of material, nonpublic research information in a restricted period prior to the Facebook IPO."

Although Mahaney was just dismissed from his job Friday morning, the junior analyst was terminated on September 27. Massachusetts Secretary of the Commonwealth William Galvin said the junior analyst shared private information with online media firm Techcrunch.com regarding Mahaney’s estimates on Facebook revenue and risks and positives with the IPO. The Techcrunch employee was a friend of the junior analyst while they both were at Stanford University, according to Galvin.

In its investigation, the state uncovered emails from Mahaney to a French business magazine sharing confidential information about YouTube revenue estimates and emails from the junior reporter to TechCruch employees.

In an email cited in the order related to Mahaney’s info sharing, the analyst actually wrote, "this could get me in trouble. Shoot." He certainly wasn’t wrong with that statement.

Forewarning others, Galvin commented, "This penalty should serve as a warning to the industry as a whole.”

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Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 160.47 -5.51 -3.32 37,524,191 Trade
C Citigroup Inc. 65.93 0.74 1.14 15,601,081 Trade
GOOG Alphabet Inc. 1,184.26 -0.20 -0.02 1,292,633 Trade

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