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Shareholders Sue Facebook, IPO Underwriter; NASDAQ Glitch Leaves Shareholders Unsure if Sell Orders Went Through; Euro Crisis Talks; Dow at Lowest Point Since Start of 2012

Aired May 23, 2012 - 14:00   ET


MAX FOSTER, HOST: Facebook and its underwriters are sued over its disastrous IPO.

The Dow drops. It's at its lowest point, now, since the start of 2012.

On the markets and at an EU summit, the focus is all on Greece.

I'm Max Foster. This is QUEST MEANS BUSINESS.

Hello to you. In class action lawsuits, Facebook and its main IPO underwriter, Morgan Stanley, are accused of making untrue statements and hiding information ahead of the trading debut. The shareholders behind the case say the alleged deceit has cost them $2.5 billion.

Facebook denies the accusations. A company spokesman says, "We believe the lawsuit is without merit and will defend ourselves vigorously."

Facebook's transition from a private to a public company has been anything but smooth. Right now, its shares are actually gaining around 2.5 percent in New York on the day. They're still well below the $38 IPO price, though, and more than 30 percent lower than their trading highs back on Friday.

Now, some investors aren't sure if they're losing money or not. A trading glitch on the NASDAQ last Friday means some shareholders don't know if their sell orders were ever carried out.

And NASDAQ's CEO, Bob Greifailed -- Greifeld, rather -- says, "While clearly we had mistakes -- had made -- we had mistakes in the Facebook listing, we still want to highlight the fact that it was the largest IPO ever, and on Friday of last week, we processed over 570 million shares."

Meanwhile, Morgan Stanley, which underwrote the IPO, has been subpoenaed by the state of Massachusetts. The state says the subpoena is in connection with a critical report on Facebook given only to certain investors before trading started. US regulators are also looking into the deal.

Maggie Lake has been following all of this from New York, day after day, and the story keeps unfolding, Maggie.

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Absolutely, Max, and we should add that the senate banking committee, while not launching a formal investigation, sources tell CNN that they are also looking into the matter. It seems everyone is.

Let's drill down on exactly what the issue is with this lawsuit, and it is about the fact that internet analysts at Morgan Stanley, the lead underwriter, took down revenue estimates for Facebook right before the IPO told certain clients that but did not disseminate that information widely.

There are also reports that analysts at other underwriters, JPMorgan, Goldman Sachs to name a few, also did the same thing. This is sort of the information that is at the center of this dispute, and the lawyers arguing for the Facebook shareholders say listen, its offering was not done fairly, and it harms Facebook shareholders.

Sam Rudman is a partner at law firm Robbins, Geller, Rudman, and Dowd, which field the suit against Facebook and Morgan Stanley, and he joins us now. Sam, thanks very much for coming in.

Let's talk very specifically about what you think happened that was incorrect. Listen, anybody who buys a share or a stock has to do their homework. We talked at length leading up to the Facebook IPO about the risks to revenue. What is it that you think these analysts did that ran afoul of the law?

SAMUEL RUDMAN, PARTNER, ROBBINS GELLER RUDMAN AND DOWD: Maggie, first, thank you very much for having me here. I'm always happy to give an opportunity to give the plaintiff's side of a lawsuit.

It's very clear what happened here. There was material information that wasn't shared or properly disclosed in the registration statement and prospectus prepared in connection with the IPO.

Now, you earlier referenced risks, and everyone knows there's risks associated with a business. However, when you have clear-cut material information that revenues are not going to continue -- are going -- the revenue growth is going to slow.

And material information, mind you, that the three lead underwriters thought it was material enough to reduce their earnings estimates and then tell select investors, but not put that same information in the registration statement, well, my clients and we believe that's a violation of the securities laws, compensable under securities laws, and Facebook should pay for it.

LAKE: Now, Sam, again on this point: Facebook issued an amendment to their regulatory filings on May 9th, it was widely reported, we talked about it, talking about the downward risk to revenue based on information about mobile users. That was public, everyone could have looked at it. Why, or what material information --


RUDMAN: Well, I'll tell you, I --

LAKE: -- did the analysts talk about or distribute that was not in that public filing that shareholders could have looked at?

RUDMAN: Well, look, Maggie, it's not in my complaint, but it was in news reports recently that I read as early as this morning just how significantly these underwriters took down their earnings estimates.

Go take a look at those stories and see what the reductions were, and then go take a look at the statement that Facebook's going to point to in this lawsuit about how there's a trend or a decline, and you'll see, that statement doesn't come close to advising anyone how significant or how severe the revenue slowdown growth -- the revenue growth slowdown was.

That's really what's going to be at issue in the lawsuit --


LAKE: So, you're saying --

RUDMAN: But --

LAKE: You're saying analysts --

RUDMAN: I'm sorry?

LAKE: -- had information from Facebook management that was not in the regulatory filing?

RUDMAN: It certainly seems that way. How else -- otherwise, how do they take down their earnings estimates so significantly.

And let me tell you something else. This is material -- let's make no doubt about it. This is highly material information. There isn't a single investor in that Facebook IPO that wouldn't have wanted to know that the three lead underwriters of the IPO, who are out there pushing these shares onto the public, had drastically reduced their earnings estimates.

Let's get real about it. This lawsuit is really about the unlevel playing field in the markets. There is no -- if you're a retail investor, you simply don't have a chance in this market.

And look at what happened here, how the retail investor got burned. They were clamoring for shares in this offering, and look what happened. Look what happened. They got --


LAKE: Is anything --

RUDMAN: -- material information --

LAKE: Is it possible --

RUDMAN: -- with select individuals.

LAKE: Is it possible that the -- is it possible that the bankers and Facebook followed all the rules and that the system just isn't fair? That they actually did exactly what they're supposed to do?

RUDMAN: Well, I guess anything's possible, but we don't -- I don't believe it's possible. I practice securities laws every day of my life and, to me, this looks like a clear-cut violation of the securities laws, that that registration statement was not prepared properly, did not have adequate disclosures about the revenue decline.

The underwriters knew it, because they told people that they wanted to get -- they had people they wanted to get the information to, and they made sure they got it. Why everyone else didn't get it -- hopefully we'll be able to find that out when the lawsuit proceeds.

LAKE: Sam, there are three plaintiffs now, but this is class action lawsuit. How big do you think that this could get?

RUDMAN: Well, look. The damages in the lawsuit are subject to expert testimony. Under the statutes that we're proceeding under, the damages are set by statute, and they're somewhere north of $2.5 billion.

And in the course of the lawsuit, the defendants will have the opportunity to argue that a portion of that -- of the damages are unrelated to anything that wasn't disclosed -- that we claim wasn't disclosed in the registration statement or prospectus.

The bottom line is, there's a lot of money at stake. How much, we don't know yet.

LAKE: All right, Sam Rudman, thank you very much for coming on and sharing as you did the plaintiffs' point of view. We look forward to talking to you as this lawsuit progresses. Sam, thanks very much.

And Max, I just want to make two points. First of all, it's important for us to remember that the entire Facebook IPO didn't happen in a vacuum. This is coming against a backdrop where the market is very nervous. We have a lot of events, as you well know, in Europe unfolding.

And I've talked to a lot of retail brokers who were involved in this who were involved in this who say that there is no appetite for any kind of loss from clients. That with the NASDAQ glitch, that level of nervousness in the market, of course, all feeding into this.

So, there's a lot of factors at play here. No doubt about it, though, as Arthur Levitt just told Mary Snow, one of my colleagues, this is another black eye for capitalism coming so close on the heels of the mess that JPMorgan, with the huge loss they're sustaining in derivatives, certainly not a good day for market confidence at all.

And Max, I just want to point out, Facebook not commenting on the lawsuits. They say they'll fight them vigorously, but not giving any details. And Morgan Stanley spokespeople not commenting at all on those lawsuits.

FOSTER: OK, Maggie, thank you very much, indeed.

Well, Adam Pritchard is a former SEC enforcement attorney, now a law professor at the University of Michigan. He joins us now live. Adam, is there a case here, do you think?

ADAM PRITCHARD, LAW PROFESSOR, UNIVERSITY OF MICHIGAN: Well, Facebook disclosed the problems it was having with collecting revenue from mobile phone users when they amended their prospectus.

The question is whether that disclosure was adequate, and that's going to have to be decided in court. But this is not a situation where there is no public notice of the central fact.

FOSTER: So, there's a gray area, here? The question from some investors is whether analysts got information that investors didn't. Is that the debate here?

PRITCHARD: Well, the analysts are allowed to talk to the company, and prior to becoming a public company, Facebook is not limited in making selective disclosures. This week, now that it's a public company, it's not going to be allowed to make selective disclosures.

But in connection with an initial public offering, you're allowed to make selective disclosure in part -- as part of the effort to inform institutional investors primarily about the value of the company. So, the question of liability is is there something in the registration statement or prospectus that is false and misleading?

FOSTER: So, the information in the registration statement is the information that everyone gets, isn't it? So, investors are, perhaps, upset that they didn't get all the information that the analysts got. But it doesn't always have to go into that registration statement. So, this is the debate for the courts right now.

PRITCHARD: There's a laundry list of items that the SEC requires be disclosed in the registration statement, and then there's an additional requirement that you disclose anything else that's necessary to ensure that what you have disclosed is not made misleading by the omission.

So, the plaintiffs in the private lawsuit are going to argue that there was additional information that Facebook and its underwriters had that would have given a more accurate picture of the company if it had been disclosed.

The defendants will presumably argue that they've disclosed the main facts, and that what was disclosed to the analysts was not inconsistent with what was disclosed to the public.

FOSTER: And could they argue that what they -- anything they disclose to the analysts would hopefully be passed on to the investors anyway?

PRITCHARD: Well, I think that's a harder argument to make, because Section 11 requires the disclosure to be in the registration statement. So, it won't work to say that it was passed on to investors, particularly if the disclosure is selective, that it's only being made available to the institutional investors.

FOSTER: So finally, do you think Facebook and Morgan Stanley are in trouble here?

PRITCHARD: My instinct is probably no. But if you're facing a potential $2.5 billion judgment, you think you have five percent chance of loosing, $100 million check might be a cheap way to get out.

FOSTER: Adam Pritchard, thank you very much, indeed.

After the break, guess who's coming to dinner? European leaders are in Brussels for an informal summit, though the Greek problem is still leaving a bitter taste.


FOSTER: European Union leaders have arrived in Brussels for an informal summit, and while they discuss how to mend the eurozone, outside the banqueting hall, the talk is all about planning for a breakup.

Greece has categorically denied a report that eurozone countries had agreed to prepare contingency plans for it to leave the euro. The Belgians' finance minister says it would be irresponsible for countries not to have a plan B. Earlier, the German Central Bank said the consequences of a Greek exit will be significant but manageable.

French president Francois Hollande spoke earlier with Mariano Rajoy. The Spanish prime minister said he wanted more growth in Europe, whilst Mr. Hollande said he would be pushing for Greece to stay in the eurozone.


FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): On Greece, I will do everything that I can do in my position to convince the Greeks to choose to stay in the eurozone while respecting the commitments that have been made and to do everything to convince those Europeans who could have doubts of the need to keep Greece in the eurozone.

MARIANO RAJOY, PRIME MINISTER OF SPAIN (through translator): As President Hollande mentioned, it's just not enough controlling the deficit. It is fundamental that we implement policies to stimulate growth. We need to have reforms to make our economies more competitive and more flexible, and this needs to be done in each country. Spain is already working on a labor reform.


FOSTER: European stock markets took a tumble as investors waited for the summit to get underway. The big three all fell more than 2 percent. In Italy, stocks were down more than 3.5 percent. Banking stocks were amongst the biggest losers. Credit Agricole finished down more than 6 percent in Paris.

Resources and industrial stocks fell in London and Frankfurt. The World Bank cut its growth forecast for the Asia-Pacific region, including China.

US shares are down. Technology shares are leading the sell-off after disappointing earnings and outlooks from Dell.

Worries about Greece leaving the eurozone is adding to the pessimism there, as well. Vicky Pryce is a European economist and former senior UK government economic advisor. Thanks for joining us.

This meeting tonight is so important, isn't it? But what do you think will be achieved from it? Because Hollande going into this is a whole different kettle of fish, isn't it?

VICKY PRYCE, FORMER SENIOR UK GOVERNMENT ECONOMIC ADVISOR: Absolutely. He wants more growth. We've just been hearing also the Spaniards want more growth. In fact, everyone wants more growth. The question is, how are we going to achieve it?

And that is really what is upsetting the markets right now. Yes, there's Greek exit talks, which I just don't think is going to happen. But what they really fear is that the contagion, which has already started, because markets are realizing that a number of the other countries simply cannot meet their debt obligations, is going to spread even further, and we're --

FOSTER: And today, what's going on in the markets, why are the markets down? It's not because of Greece specifically?

PRYCE: No, it is -- well, Greece has certainly spooked the markets a little bit, but what they're realizing is that a number of other countries are being affected by the same thing. Basically, low growth, inability to reduce budget deficits --

FOSTER: So, Spain, Portugal, those --

PRYCE: Absolutely. Well, you've seen the forecast that has just come out. This is a really worrying thing. The G8 summit didn't really say anything very much. This is supposed to be an informal meeting, who knows what they'll say?

But basically, there hasn't been anything directly addressing the issue of very low growth in Europe. The OECD forecasts have been really bad. If you look at Spain and also Italy, we have expectations of a decline --


PRYCE: -- in activity this year and next.

FOSTER: In terms of hard and fast solutions that could come up tonight, Hollande is going to present his euro bonds plan --


FOSTER: -- as expected. The Germans will say no, I presume.

PRYCE: The Germans will say no for the moment. They're definitely going to say no as far as --

FOSTER: Do you think they will relent eventually?

PRYCE: I think they have to. There is no other resolution for the longer term. I think there has to be mutualization of debt. In other words, everyone sort of signing up to it and taking responsibility.

The Germans are worried because it would mean that their own debt goes up, because they would be the main ones who are going to be affected, of course, because they'll have to guarantee practically the lot, because most of the other countries are in difficulty.

But what it will give them is a lot more power in terms of making sure that those bonds are directed when they're spending the right way. So actually, perversely, they're going to achieve exactly what Germany wants, which is a closer fiscal union and control over what happens in other countries.

FOSTER: They've got to find some sort of clever diplomatic language, though, haven't they? Because it'll be a U-turn.

PRYCE: Absolutely, but the interesting thing is it isn't just diplomatic language against or, if you like, across the other member states. It is also within Germany itself, because in her own cabinet, there are people who really don't want to do anything like keeping Greece in or even having euro bonds. So, she's going to have to convince them, too.

FOSTER: Just clarify for me. I know you don't think Greece is necessarily going to leave the euro, but so many people do, and it seems logical from an outsider's point of view that it would leave the euro. And you can't really understand how it can manage its debt situation. So, what is the argument for expecting Greece to stay within the euro?

PRYCE: Well first of all, getting rid of your debt and defaulting does not necessarily mean you've going to leave the euro. After all, Greece has already defaulted. It can default again. Bigger haircuts. The actual public holders, not just the private ones, but governments and also the ECB can take a haircut, too.

The level of debt is unsustainable, but it's equally unsustainable all the other countries. So, Greece leaving doesn't solve the problem. It just spreads to everyone. So, Greece leaving means, in my view, the end of the euro project.

FOSTER: And so finally, one question. When's an informal meeting not a formal meeting?

PRYCE: Well, it's very interesting, since it was built to be an informal meeting. It's basically --

FOSTER: You build an informal meeting with press conferences.

PRYCE: Well, this is the thing. Is the press conference going to be binding in any way?

FOSTER: Exactly.

PRYCE: And that's the important thing.

FOSTER: They're just hedging their bets, aren't they?

PRYCE: Absolutely.

FOSTER: So, if there isn't a solution, they can say, "Well, it was only an informal meeting."

PRYCE: Well, they will --

FOSTER: Am I being cynical?

PRYCE: They will definitely say that. This is going to be a series of discussions. This isn't going to be resolved tonight.

FOSTER: OK, Vicky Pryce, thank you very much, indeed. Currency Conundrum for you, now. The US has the nickname the greenback because the notes are predominantly green. The question, though, is why are they green?

Is it because A, green ink was readily available when the small sized notes were produced? B, to stop counterfeiting? C, because people identify the color with strength and stability. We'll have the answer to that later in the show.

The dollar's rise is continuing today. Right now, it's up around two thirds of one percent against the euro and the yen. A euro will buy you just over $1.25. A dollar will buy 79.4 yen. The euro -- the US currency is also rising against the UK pound, up by two fifths of one percent.


FOSTER: Formula 1 teams are preparing for this weekend's Monaco Grand Prix, and one team in particular will have some very interested observers. Force India's star driver, Paul Di Resta has been attracting the attention of teams like Ferrari and Mercedes. Amanda Davies went to see how Force India gets ready for the race.


AMANDA DAVIES, CNN SPORTS CORRESPONDENT: Where Formula 1 goes, a whole community travels, and the miles that the drivers complete on the circuit are nothing compared to the miles that the teams complete crisscrossing the globe to all the various destinations.

It's a feat of logistics and planning, as we've been finding out joining Force India on their trip, here, to Monaco.

DAVIES (voice-over): The work starts nearly a thousand miles away at the team's HQ in Northamptonshire in England. The entire garage is packed up and transported, everything from tires to nuts and bolts to highlighter pens and chewing gum. Thirty tons of equipment make the journey to each race, and Monaco is no exception.

The most valuable cargo is, of course, the cars themselves, each worth about $1 million. One for driver Paul Di Resta, another for Nico Hulkenberg.

Once loaded, it's lock up, lights on, and off they go.

It takes 16 hours to drive across France to the coast of the Mediterranean to perhaps the most glamorous venue on the calendar.

DAVIES (on camera): Well, they call Monaco a race like no other, not just for the drivers, but also because of the teams and what happens when they're here. This is the garage, and just over here is Franco Massaro, who's the man who's in charge of getting all this equipment from home to the circuit, and then get it all set up, ready for the cars to race over the weekend. Let's come over here.

As you can see, there's quite a lot of stuff in here, and it's pretty cramped. How different is this, Franco, to a garage at any other circuit?

FRANCO MASSARO, SAHARA FORCE INDIA RACE TEAM COORDINATOR: The garage is a lot smaller, and it's very cramped. If you walk around, you'll see how cramped we are. Everybody has to sort of breathe in a little bit and just put up with it for the weekend. But then, the atmosphere here, is like no other, as well.

DAVIES: And who has the hardest job? Is it the drivers around the circuit, or the drivers of these big lorries getting all the stuff here?

MASSARO: The drivers of the lorries have a bigger challenge getting into Monaco. You've probably driven down yourself today and seen how tight it is getting in.

Monaco's a little bit different, but because of the lack of space, we can't have the transporters sat there, it won't hold a lot of the equipment. And what we do is get one truck at a time down into the pit lane, and that's unloaded, and start setting the garage up.

DAVIES: Just tell us, how many people on race day would you have in these garages?

MASSARO: It would be about 45 people between this floor and the upper floor working. And then, on top of that, you might have another 10, 15 people not working. Guests and people wandering around.

DAVIES: Can we just go out and have a look at the back of these garages?


DAVIES: Just to show you how small this area is. There are various things going on, so we'll be a little bit careful. But this --

MASSARO: So, there's no depth to the garage. Most garages are a lot deeper.

DAVIES: And then, you come out here --


DAVIES: And here's the race track. Just up here.

MASSARO: There's the start/finish.

DAVIES: This is -- the start/finish line with the grid.

DAVIES (voice-over): While it may just be a short hop from garage to grid in Monaco, there's still plenty of miles to be covered by Franco and his team before the end of the season.


FOSTER: Well next, more on the Facebook fiasco. We'll speak to Brian Wieser, one of the first analysts to tell his clients to sell.


FOSTER: Welcome back, I'm Max Foster, these are the main news headlines this hour.

Egyptians are choosing a new leader in the country's first free presidential election in modern history. There are about a dozen candidates vying for the top spot. The leading contenders include Arab League chief Amr Moussa, Muslim Brotherhood candidate Mohamed Morsy, and a modern Islamist Abdel Moneim Aboul Fotouh.

High-level talks are underway in Baghdad over Iran's controversial nuclear program. An Iranian delegation is meeting with representatives of the five permanent UN Security Council members plus Germany. On Tuesday, the head of the UN's nuclear watchdog agency said Iran may be close to signing a deal for new inspections.

The leaders of Spain and France got together today ahead of an informal summit in Brussels. They'll join other European leaders later in the day to deal with the debt crisis and encourage economic growth across the eurozone.

Shareholders have filed a lawsuit against Facebook alleging crucial information was concealed ahead of the social network's initial public offering last Friday. And US regulators are looking into accusations that Morgan Stanley shared a negative assessment about Facebook with major clients ahead of last week's IPO. Morgan Stanley was the lead underwriter for Facebook's debut and denies any wrongdoing. Facebook says the lawsuit is without merit.


FOSTER: Now investors have launched a class action lawsuit against Facebook and its underwriters over the social network's messy IPO. Brian Wieser is a senior analyst with Pivotal Research. He was one of the first who advised his clients to sell Facebook stock. He joins me now live from Portland in Oregon, and I'm sure you've got some quite happy clients right now.

But first of all, can you help me clarify one thing? Was there information that the analysts got that the investors didn't, which was somehow unfair?

BRIAN WIESER, SENIOR ANALYST, PIVOTAL RESEARCH: Well, we'd like to know, too. The reality is that there was information that was implied by an amendment to a securities filing and although that indicated something, it was absolutely unclear as to what it meant.

It didn't -- we don't know that they didn't bring their numbers down to where we already were. We're not an underwriter. We're not an investment bank. We weren't part of a syndicate. So we would not have been privy to any of their information and developed our analysis independently.

FOSTER: Yes, so tell us what tipped you off about this being a bad stock for your clients, when you didn't have the information that the big boys did?

WIESER: To be clear, we like the company. We merely think that it was priced for perfection at $38. That's as simple as that. When we look at the opportunities for the company, the revenue growth potential is still pretty substantial. But the problem is it's only worth a certain price. And for us, that price was $30.

FOSTER: How did you work that out, though, and what were you going on? The forecasts?

WIESER: Sure. Well, we developed our own forecasts, just kind of cash-flow based revenue forecast. We spent a lot of time personally having worked inside the advertising industry after time as a banker and analyst myself.

And so understanding the opportunity that marketers are chasing and speaking with dozens and dozens of marketers and advertising executives over the course of the last few months. That's how we developed our forecast for the top line.

The operating expenditures, you know, we've gotten very familiar with the company and how it's pivoting from a focus on small businesses and self-service to focusing on large brands. That changes their cost structure. That informs how we think about it.

We did deep analysis on the capital expenditures the company will need to undertake on data centers and the like. We actually came out with most of our forecasts back in February, and that's where we set our price targets.

FOSTER: So when other investors are sitting there a bit annoyed, at least, with Morgan Stanley and Facebook about losing money on stocks that they had bought, do you think that's actually quite unfair because the information was out there for everyone to make their own analysis?

WIESER: Well, you know, at the end of the day, everybody should come up with their own analysis and try to understand the fundamentals. To the extent that it would create a negative piece of momentum, it wasn't the only piece of negative momentum. The news from General Motors, although mostly a red herring in our view, was not favorable.

The fact that the offering was expanded as it was, there were a number of signs that were not terribly positive for investors going into it. And that was all public. Again, we come back to focusing on the fundamentals that we think the revenue growth is there, but it's not without risk, right? And you know what happens in the current quarter, independent of what --


WIESER: -- this quarter.

FOSTER: I'm just wondering if you're at all concerned, the talk about psychology, though, here, because when people see it start falling, actually economics can sometimes get out of the window, and they start worrying about losing their money, it becomes a confidence issue. Are you concerned that that might happen to Facebook shares?

WIESER: Oh, certainly, and there's more risk to the downside than to the upside at this point. And though even though the company is approaching our price target, you know, there is some risk to further downside because of the negative sentiment around the offering and the company.

But that said, you know, this year will be a rough year under most circumstances because the company is pivoting its focus from smaller marketers to larger ones. It will create lumpiness in their top-line revenue growth.

FOSTER: Brian Wieser, thank you very much indeed for joining us.

Well, (inaudible) bigger story, the markets generally are down. Alison Kosik is over the Stock Exchange with that.

Hi, Alison.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, Max. Yes, the experts are saying that the selling that we've seen with Facebook this week really isn't just people having concerns about the business model revenues. You know, Facebook has attracted a lot of day traders, too.

You know, investors, (inaudible) investors of course who quickly buy and sell a stock in hopes of making a quick profit. So that's really added to a lot of the volatility we've seen in the past couple days. Of course, this IPO has been nothing but drama-filled.

First, a trading glitch at the Nasdaq and now regulators are eyeing Morgan Stanley, plus shareholders are suing the banks and Facebook certainly no sign that the Facebook saga is going to be ending any time soon. That said, there's plenty happening on the broader market as well. Stocks are down sharply.

The Dow is falling 133 points. Investors are very worried about Greece's potential exit from the Eurozone. The World Bank is cutting growth estimates for China and that's not helping matters, either. The tech sector is certainly under pressure.

We are watching shares of Dell plunge 18 percent after weak sales and guidance. Hewlett-Packard shares are down almost 5 percent. It's reporting after the bell, and Hewlett-Packard, Max, is expected to announce some mass layoffs. Max?

FOSTER: OK, Alison, thank you very much indeed for that. We come back to you when we get confirmation.

Business travelers' needs are changing. They don't want white tablecloths and candles. They just want good food, fast and the Four Seasons is stepping up. We'll have more on that in a moment.



FOSTER: Now when it comes to eating on the road, travelers no longer want long, drawn-out meals. They want room service and they want it fast. The Four Seasons says the needs of their guests have changed. And in response, they've brought in the 15-minute menu. Richard asked the corporate director of food and beverage what's changed in the last decade.


GIANLUCA SPARACINO, CORPORATE DIRECTOR, FOOD & BEVERAGE, FOUR SEASONS EMEA: I think it all goes down to technology information on demand. People are multitasking at a totally different level.

I mean, I look at myself in this position and demand hotels that I go to and my expectation in the room when I arrive, you know, I plug in, I need to organize myself and my office, I need to set up my office first and then organize the rest of the things. And I think people are the same. They want to have that sort of speed, the sort of quality as they would have at home.

RICHARD QUEST, CNN HOST: Are you finding these days, is the competition for restaurants and other eating opportunities, is now so great in most of the major cities, are you finding room service, which is also expensive, more popular or less popular, or does it just bounce along in the same trend?

SPARACINO: I think room service, as I see it, always stays at the same trend. Many people order breakfast room service because it's part of their wake up and go routine.

I think in the evening, when they have time to wind down and they're doing -- they need to do work, you'll see that happening. So that's really what we're trying to do, is give people what they want. And that's what our customers want.

If you stop listening to your customer, I think you've stopped listening to the business that we're in. And we're in the customer business, and the customer's telling us, hey, we have a need for speed. So we're going to give you what you want at our quality, though. And that's really what we're trying for in the long term.

QUEST: When you order room service, you start looking at the charges.


QUEST: And no matter if it's breakfast at X and then service is added on top of that, and then the delivery charge, the tray change, the room service charge, whatever charge you want to call it, what purpose does that serve?

SPARACINO: What we are finding now, or what we're trying to do now is give the person one charge value for money. It's very hard to go away from the past, but we're trying to build it in as we go forward, saying, OK, what's value for money in room service and what dictates good value for money? I think the customer wants one price and they want to know what they're paying at the end of the day.

People are looking for value for money, whether they dine in great restaurants, whether they dine in fast restaurants. At the end, when you leave the restaurant or leave room service, you're going to ask yourself was the meal worth the price I paid? And that's it.

And then we really want people to dine wherever they can in the hotels. And the same applies to minibar. I mean, people in minibar have been saying I'm not going to touch minibar because it's so expensive. And we're trying to go away from that, make it affordable for people, make it normal.


FOSTER: That'll be the day.

And now the first Boeing 787 built in South Carolina is making its maiden flight. It took around 10 months to put the Dreamliner together, and Boeing is aiming assemble three Dreamliners a month at the factory, which was the -- was at the center of a bitter labor dispute last year. The plane will now fly to Texas for painting and there will be further testing in South Carolina before delivery to Air India early next month.

We're going to talk weather in Florida and rain, in particular, Jenny.

JENNY HARRISON, CNN METEOROLOGIST: In particular, Max, yes, not just a little bit of rain, a huge amount of rain which came down on Tuesday. Let's have a look first of all at the radar the last 12 hours. You can see across the southeast, just off the tip of Florida there, close to Miami, more showers, also for a while you can see there we've got a yellow box. That's just a warning of some severe thunderstorms.

But the rain that came down Tuesday, it was a phenomenal amount in Miami, 246 millimeters. Look at the monthly average, 137. That's just a smidgen under about 10 inches of rain. Have a look at these pictures, because as you would well imagine, that amount of rain coming down in a short space of time did lead to some problems.

There's a lot of flooding about, a lot of the service roads, you could see, were obviously pretty unpleasant, so certainly pass through, and as you can see here a big truck just deciding to think about it. But it actually means that this Tuesday it was the second wettest day ever on record in May, second wettest May record day in Miami.

And the heaviest amount of rain was actually in 1977 and that was 292 millimeters, but also it was the second wettest single day at Miami Airport since October 2000. So there is more rain in the forecast, I'm afraid. Have a look at this. You can see why.

A little area of low pressure with the trough just working its way very gradually northwards and just sitting off the coast, even as we head into the weekend, so more rain in your forecast. But it is needed, this rain. And the far south of Florida, Miami of course, it is actually not in drought right now. But as soon as you move away from there, look at this. They're looking at severe to extreme drought.

And then a different problem in the southwest of the U.S. Not surprisingly, it is that time of year, particularly across the southwest. You've had very, very strong winds and also very, very dry conditions. Have a looking at these pictures because, as you might expect, we have now got these fires, Arizona, Colorado and now Nevada, this big fire.

Those really just began on Tuesday afternoon. But you can see how big it is. It just stretches across acres and acres. And so far, no reports of any serious damage to buildings or property but obviously as I say, it is that time of year. So is there any rain in the forecast? Well, not really in the southwest. Instead, it'll be dry.

It'll also have some strong winds. Winds could easily be around 90 kilometers an hour at times. And of course, we're talking about some fairly heavy areas as well. And then this you can see to the north across the Upper Midwest, there's a low working its way through Canada. And this is the front trailing down. This is where we'll see some very strong thunderstorms in the next couple of days.

Temperatures pretty warm across the south, 30 in Atlanta, 36 Celsius there in Dallas this Thursday. Then we head to Europe. The story here continuing to be really about the heat. We've got that low still sitting in the central Med. But look at the temperatures. These are the actual temperatures right now, 26 Celsius in London, coming up to quarter to 8:00 in the evening.

Meanwhile, just 18 in Milan, the same in Belgrade, all because of that system of low pressure. Look at the temperatures on Wednesday. These are some of the high temperatures, so Berlin, 31 degrees. The average is 19.

But it is actually going to cool off. We've got this system working its way eastwards. We've got then the temperatures returning to average across much of central and eastern Europe, but out towards the west, it'll still be very warm, still some warnings in place for those strong thunderstorms. You can see the temperatures beginning to cool off across these more eastern areas.

London for the next couple of days still well above average and also Paris, even by Saturday when it cools off it's still pretty good. Rain across the south, clear, sunny and warm, pretty much elsewhere, Max.

FOSTER: Good news, Jenny. Thank you very much indeed.

Now next, the man TV enthusiasts can thank for hours of channel surfing. We look back on the life of Eugene Polley.


FOSTER: The result of our "Currency Conundrum" for you, the U.S. dollar has the nickname the greenback because the notes are predominantly green.

The question is why are they green, and the answers, possible answers, A, green ink was readily available when the small size notes were introduced; B, to stop counterfeiting; C, because people identified the color with strength and stability. What's the answer? Well, whichever you guess, you are right, I'm pleased to say. They're all correct.

Now he's the man behind Apple's most iconic products and now he's won the ultimate accolade, a knighthood from the Queen. The British designer Jonathan Ive received his knighthood at Buckingham Palace from Princess Anne for services to design and enterprise. He is the senior vice president of industrial design at Apple.

He was a close friend of Steve Jobs and is widely credited with masterminding the design of the company's products. Whilst receiving his honor, he spoke to the Princess Royal about her own iPad, of course. He can always talk to someone about his own products.

Ive has had a hand in practically every one of Apple's most famous products. All of them have helped Apple make billions of dollars. His first major success was the iMac with its brightly colored monitors.

According to "Business Week," Ive went on a research visit to a jelly bean factory to work out how to make the plastic casing look exciting and the key was to keep evolving. So Ive also decided MacBooks should be made from aluminum rather than from plastic. And the iPod soon followed, which saw the birth of the famous scroll wheel there in the middle.

Then came the iPhone, which blew everyone away. And this is where Ive got a chance to pay homage to some of his design idols. He's often cited that Braun's Dieter Rams (ph) is an influence, which is why things like the iPhone calculator resemble some old Braun products.

And finally, there's the iPad, of course, that Princess Anne obviously has. And if you wonder what's next, Ive says his latest project is his best and most important work yet, always keeping us guessing.

Well, one of the earliest tech innovators was Eugene J. Polley. You might not have heard of him, but he created the Zenith Flash-matic in 1955, the first TV remote control. Eugene Polley died today, age 96, and John Taylor is a spokesman for Zenith Electronics, where Mr. Polley worked for 47 years. And Mr. Taylor joins me now from Boston via Skype. Thank you very much indeed for joining us.

First of all, tell us about our very first product, because it wasn't perfect, was it, even if it was a great idea.

JOHN TAYLOR, ZENITH SPOKESPERSON: It was an amazing concept in 1955 that Gene Polley came up with. It was called the Flash-matic and it used a directional flashlight to activate the features of the television set, so you could turn the TV on, you could change the channels.

You have to remember, in those days, in Chicago where this was developed, there were only three or four VHF broadcast stations on the air. So people were used to changing the channel on the TV. But what the big breakthrough was really the first time you could mute the sound on those annoying commercials.

FOSTER: Absolutely. But didn't the lights in the room get in the way of the signal sometimes, a few early technical problems.

TAYLOR: There were reports early on, you know, when, depending on how your console TV was situated in the living room, as the sun would come up, sometimes it might change channels on your TV. But those instances were really rare. What was proven was through Gene Polley's innovation that you could finally sit in your easy chair and have control of TV content for the first time.

FOSTER: And that, arguably, has come to define television, even living rooms since, or am I over-egging it a bit?

TAYLOR: Well, I don't think so. You know, Gene was widely known as the father of the couch potato or for good or bad. We all need to get out and exercise more of course, but when you fast forward to today with this universe of over 500 channels on cable and satellite and telcos, you know, the remote control, it's not a luxury or a convenience any more, it's a necessity. The only way you can really navigate through all this content that's available today.

FOSTER: It was very popular with the advertisers, was it, in these early days, probably isn't now, even still, is it?

TAYLOR: Well, you know, there's this concept of zapping and, you know, channel surfing during commercials, you know, all of this kind of was born with Gene Polley's innovation in 1955.

FOSTER: So he worked for you for something like 50 years. Was he proud of this invention? Did he talk about it a lot in his later years or was this something that he wanted to move on from because he invented it so long ago?

TAYLOR: He was very proud of this, and he was involved in many things over the years during his career at Zenith. He was working on radar technologies during World War II and was working on the early video disc technology which evolved into what is known as the DVD and Blu-Ray today. But I think the one thing he was most proud of was the development of the remote control.

And even in his later years, when I would visit him at the assisted living home, he had a brand new flat screen TV with this fancy remote with the 50 buttons. And he would love to show people how it had evolved from that original rather simple device to today's most advanced remotes.

FOSTER: And did he ever tell you what gave him the idea? What was his flash of inspiration?

TAYLOR: You know, I was trying to reconstruct that over the last couple of days after he passed on and the lore is a little bit fuzzy. But the founder of Zenith, Commander Eugene McDonald, was actually, believe it or not, in the early `50s, working on subscription TV. He thought that pay TV would be the way that people would enjoy television in the future.

And he was annoyed by commercials and knew that consumers were, too. So Gene Polley's idea was how -- started with how do you mute the sound on commercials. And that led to the overall development of the wireless remote control.

FOSTER: OK. John Taylor, thank you very much indeed for joining us from Zenith Electronics. It's a fascinating story. Eugene Polley, he died today at the age of 96.


FOSTER: Bulgaria's prime minister is in Brussels for the informal E.U. meeting, his country only joined the E.U. in 2007 and that was right at the start of the economic crisis. Now the Bulgarian president says the government will wait and see how things unfold before it officially joins the Eurozone.

Ralitsa Vassileva spoke with President Rosen Plevneliev from the NATO summit on Monday, and she asked him if he was actually having second thoughts.


ROSEN PLEVNELIEV, PRESIDENT OF BULGARIA: Growth cannot be based on increasing mountains of debt of cost of next generations. Growth can only be worked out with structural reforms and with sustainable actions.

RALITSA VASSILEVA, CNN CORRESPONDENT: Let me ask you about whether you have changed your mind about Bulgaria joining the euro after what you've seen happening in Greece.

PLEVNELIEV: Bulgaria was always weak when it was isolated. Our history shows that when we got integrated, a part of a successful families, we have been moving and we have been developing much faster. So we are a proud and effective European member. And sooner or later, we will become a member of the Eurozone.

Of course, our government now is taking a position of really waiting and seeing how this is going to develop. But be sure the euro as a common currency is one of the two most important European projects started in the past 20 years. And we stay firm to this. We do not know if this going to happen in two or three years, but the euro will be stable and Bulgaria will be within the Eurozone.


FOSTER: While its instability actually of the euro which is shaking U.S. markets there from Wall Street shares down, but also some disappointing results from Dell, which knocked all of the tech shares as well. So some U.S. corporate news, but also the wider European economic news dragging down the Dow by three-quarters of 1 percent.

European stock markets fell ahead of the (inaudible) summit tonight, the big three all fell more than 2 percent. In Italy, stocks were down more than 31/2 percent. Banking stocks amongst the biggest losers, credit CAC and Cole (ph) finished down more than 6 percent in Paris.

That is QUEST MEANS BUSINESS. Thank you so much for watching. I'm Max Foster in London. The headlines in just a moment.

Millions are voting in what many see as Egypt's first open leadership race in modern times. Thirteen candidates are in the running, among them Arab League chief Amr Moussa, Muslim Brotherhood candidate Mohammed Morsi and the moderate Islamist, Abdel-Moneim Abolfotoh.

High-level talks are underway in Baghdad over Iran's controversial nuclear program. An Iranian delegation is meeting with representatives of the five permanent U.N. Security Council members plus Germany. On Tuesday, the head of the U.N.'s nuclear watchdog agency said Iran may be close to signing a deal for new inspections.

The leaders of Spain and France have met ahead of an informal summit in Brussels. They'll join other European leaders later in the day to deal with the debt crisis and encourage economic growth across the Eurozone.

Shareholders have filed a lawsuit against Facebook alleging crucial information was concealed ahead of the social network's initial public offering last Friday. And U.S. regulators are looking into accusations that Morgan Stanley shared a negative assessment about Facebook with major clients ahead of last week's IPO.

Morgan Stanley was the lead underwriter for Facebook's debut and denies any wrongdoing.

That's a look at some of the stories we're watching for you this hour on CNN. "AMANPOUR" is next.