Sen. Jack Reed, D-R.I., urged regulators to act swiftly, but said Congress may want to re-examine "the procedures for taking a company public," noting that "a dysfunctional IPO market can harm our economy." Reed's comments highlight the broader political issue: the uneven availability of information about startup companies leading up to their public offerings. Most insiders that invested in Facebook early still turned handsome profits on the stock, which remains down roughly 10 percent from its offering price. It was retail investors, or the general public, that were left holding the bag as the stock plunged early due to technology troubles with the NASDAQ and disconcerting reports about advertising revenue. Because valuations for Facebook and other startups are based so heavily on projections, even the slightest change in revenue could have a large impact on the company's stock.
The Wall Street Journal reports certain investment firms were warned by the deal's underwriters that the company's short-term prospects were not quite as rosy as previously thought. That didn't prevent Facebook CFO David Ebersman and lead underwriter Morgan Stanley from increasing both the price and number of shares available just days before the IPO, prompting many market observers to accuse them of buying into the hype around the stock and overestimating demand. The availability of Facebook shares on secondary markets also has fed into the perception that insiders squeezed most of the short-term value out of the stock before dumping it on the public at an elevated price. That perception could serve as a warning to other hot tech companies, such as Twitter, that are eventually expected to go public. Quotable: “Effective capital markets require transparency and accountability, not one set of rules for insiders and another for the rest of us. There’s a lot that we don’t know about this IPO but a lot that we do. We know that the SEC must fully investigate and take appropriate action if it discovers any violations. The conduct in this highly-publicized IPO only reinforces that the Senate was mistaken in voting to remove oversight from approximately 98 percent of all IPOs — for companies making less than $1 billion per year.” — Sen. Sherrod Brown, D-Ohio. CRS on Cybersecurity: There is significant uncertainty over the current cybersecurity laws and how they would change under the various bills pending in front of Congress. This Congressional Research Service report (PDF) should help add some clarity if you're looking to catch up. Wyden Demands Details on Trade Pact: CQ's Joseph J. Schatz reports Sen. Ron Wyden unveiled legislation on Wednesday that would ensure members of Congress have access to trade agreements negotiated by the administration behind closed doors. The Oregon Democrat has been an outspoken critic of the secrecy surrounding negotiations over the Trans-Pacific Partnership (TPP), a Pacific Rim trade pact that some fear would impose harsh penalties on websites accused of intellectual property violations. Critics of TPP have compared it to SOPA and PIPA, the online piracy bills championed by Hollywood but shelved in Congress after massive online protests. Wyden lead the opposition to SOPA and PIPA and has been equally vigilant on TPP, which has drawn serious concern from the tech community. Schumer Slams Saverin Defenders: Sen. Chuck Schumer, D-N.Y., will deliver a speech at approximately 11 a.m. on the Senate floor that he has billed as a response to "right-wing activists and commentators who have rushed to the defense of Facebook co-founder Eduardo Saverin, the multibillionaire who recently renounced his U.S. citizenship in order to dodge up to $10 million in taxes." Saverin's decision has been portrayed as defection by much of the media, and prompted Schumer and Sen. Bob Casey, D-Pa., to introduce a bill that would bar wealthy ex-pats from reentering the country once they leave for tax reasons. Saverin has said his decision was not related to taxes, and that he must still pay a sizable amount in capital gains taxes on his holdings in order to renounce his U.S. citizenship. FCC Open Meeting Today: The Federal Communications Commission will hold its monthly open meeting on Thursday, the first since commissioners Ajit Pai and Jessica Rosenworcel were sworn in last week. The Commission will consider permitting the use of flying cell towers to aid disaster response, and setting aside spectrum for wireless devices that monitor a patient's health and vital signs. The commission will also consider a report and order intended to reduce barriers to broadband deployment in the 800 MHz band of spectrum. Commercial Space Funding Still Uncertain: CQ's Ambreen Ali reports federal funding for the commercial space industry remains uncertain even as the first commercial spacecraft prepares to dock at the International Space Station on Friday. SpaceX successfully launched its Dragon space capsule this week, a precursor to the commercial spacecraft that will be used to shuttle NASA astronauts to the station. NASA has relied on Russia to ferry astronauts since retiring the shuttle program last year, at a cost of $400 million annually. But appropriations bills pending in the House and Senate would cut nearly 40 percent from NASA's $830 million funding request for commercial crew program is fiscal 2013.NASA already has pushed back the completion date for the commercial crew program from 2016 to 2017, blaming the delay on reduced funding from Congress last year. The International Space Station is expected to cease operations in 2020, prompting some lawmakers to recommend that NASA streamline its planned competition for the commercial crew vehicle and just pick from one or two contractors. But space advocates say reducing the number of private companies in the space program could result in higher costs in the long term due to reduced competition.