Analysts at banks handling the Facebook initial public offering tipped off big investors that the iconic social network's revenue might come in weaker than everyone thought, while most investors were left in the dark, the Wall Street Journal reports.

Facebook went public last week valued initially at $38 a share, and the price plunged afterwards in part on concerns that although the site boasts 900 million users, making money off of them remains a challenge.

Capital Research & Management, a Los Angeles firm, was set to participate in the IPO, but got the word before the May 18 offering that revenue could disappoint, and therefore cut the number of shares it had planned to buy, the Journal adds.

One Capital Research & Management manager told lead underwriter Morgan Stanley the valuation was "ridiculous," the Journal adds.

Wall Street banks argue they convey information to big clients if those clients pay for it at certain times before an IPO, although once the company goes public, such disclosure ends.

Securities lawyers are already calling for new rules to ensure information flows evenly to both big investors and the retail buyer.

"Analysts should not be giving opinions about the IPO at the same time their firms are acting as underwriters. They should not be giving information that's not in the prospectus to favored clients," securities lawyer Jacob Zamansky, who represents investors in securities cases, tells the Journal.

Meanwhile, lead underwriter Morgan Stanley is defending itself.
"Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs," bank spokesman Pen Pendleton says in an e-mailed statement to Bloomberg.

"These procedures are in compliance with all applicable regulations."
Regulators are probing whether underwriters, which included Morgan Stanley, Goldman Sachs Group Inc. and J.P. Morgan Chase, improperly communicated any data.