Morgan Stanley defended its role in Facebook's initial public offering after a Massachusetts regulator subpoenaed the bank over talks between an analyst and investors about the social media company's revenue outlook.

"Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs," said Pen Pendleton, a spokesman for the New York-based investment bank.

"These procedures are in compliance with all applicable regulations."

Facebook shares have plunged in the three days since the second-largest IPO in US history, prompting investors to blame Morgan Stanley, the lead underwriter.

The bank said it sent a copy of a revised prospectus that Facebook filed on May 9 to all of its institutional and retail investors.

The filing disclosed that Facebook's advertising growth hasn't kept pace with the increase in users.

"In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information," Pendleton said.

"These revised views were taken into account in the pricing of the IPO."

William F. Galvin, Massachusetts' secretary of the commonwealth, said his securities division subpoenaed Morgan Stanley over talks between Scott Devitt, the research analyst, and the firm's institutional investors about Facebook's revenue.

Those communications also may be "a matter of regulatory concern" to the Financial Industry Regulatory Authority, the industry-funded brokerage watchdog, and the US Securities and Exchange Commission, Finra chief executive Richard Ketchum said.

Ketchum didn't say whether his agency was investigating Morgan Stanley. John Nester, an SEC spokesman, declined to comment.

Ken Sena, an analyst with Evercore Partners, cut his 2012 revenue estimate for Facebook by 6 per cent to about US$5 billion after the May 9 filing, citing the social media company's disclosures about users' migration to mobile devices and ad-revenue growth.

General Motors announced two days before the IPO was priced that it would suspend advertising on Facebook, and the social network "was emphasising" that its mobile revenue per user was lower than for desktops, Ritter said.

"Any analyst who ignored that and kept the revenue growth rate estimates up wouldn't have been doing a good job."

- Bloomberg