What role does Morgan Stanley play as the underwriter of FaceBook?

[Sally B]

What acts does it actually do in an IPO offering;what does underwrite mean in the stock market setting?

[c3po8mo]

The short answer is they are partially responsible for setting the IPO price and solely responsible for selling the stocks. Facebook, as with most companies, would be ill equipped to pre-sell all their shares of stock. It would take a ton of new employees, costs, etc so companies hire underwriters instead to sell the stock. In return Morgan Stanley gets a % of the IPO price, and the option to buy the stock first.