Did Facebook kill small investing?
Retail investors have pulled billions out of stocks in the weeks since the infamous IPO.
Certainly there were other factors scaring investors in that time, including the ongoing crisis in Europe, the disappointing U.S. jobs numbers and the gloom-and-doom talk about the markets.
Facebook was supposed to be a bright spot in all of that turmoil. It was supposed to be the stock that brought retail investors back into the market. But the IPO was a disaster -- and now retail investors are more burned than ever.
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"Everybody asks: When are the retail investors going to come back? If we keep doing this, they'll never come back," Sang Lee, a managing partner at a Boston consulting firm, told the Journal.
Facebook priced its IPO at $38 a share, a price that seemed affordable to small investors leading up to the event. But the stock had a horrendous first day of trading -- marred by technical and trading glitches on Nasdaq -- and at several points threatened to fall below that price (the deal's underwriters had to buy up more shares throughout the day to keep the price above $38).
The stock has plunged since then, and closed Monday at $27.01.
Investors are disappointed in the stock price. But what might have made them more cynical was the fact that analysts at several Wall Street banks lowered revenue estimates for Facebook before the IPO -- and told preferred clients while keeping small investors in the dark. That inequity is at the heart of at least one class-action lawsuit against Facebook and the IPO's major underwriters.
"Sooner or later, people are going to clue into the fact that one or two big banks, acting in concert with a choice assortment of unscrupulous 'preferred investors,' can at least temporarily prop up or topple just about anything they want, from Greece to Bear Stearns to Lehman Brothers," wrote Matt Taibbi in Rolling Stone.
Retail investors sent a clear message to Wall Street in the weeks following the IPO: We're done. They have taken nearly $5 billion out of stocks -- an arena which seems increasingly tailored to the big money at everyone else's expense.
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is what it is all about. The small investor has been beaten up by insider deals, bad information, and manipulation too many times to ever trust the market again.
Fool me once shame on you-Fool me twice shame on me.
Uhhh, no..FB has not destroyed the small investor market. That was well in progress way before this sh*tshow.
The trust of small investors has been so abused over the last decade that a lot of us are jaded and cynical that the markets are heavily manipulated by a privileged few for their own (not our) benefit.
What if the system was able to function honestly, and brought forward privately-held companies for IPO that :
- Have a real product that looks like it can produce revenue and is proprietary, not susceptible to fads, and cannot be easily replicated (e.g. not "vaporware" products like FB)? Remember that idea called "barriers to entry"??
- Have opening share prices where the math works and there is a demonstrable connection to benchmarks of values, like EPS and other fundamentals we can understand.
- Don't withhold key information investors should have to make a fair, intelligent purchase value decision---that's called "being crooked" (dishonest, in case you don't understand).
- Don't engage/buy-off the media to hype your product beyond the realm of fantasyland.
- Structure an IPO that allows the investor to get in at a share price that offers real value, rather than after the strike price at which all the insiders have sold.
- Find companies whose executive management look like business people and don't effect the pretense of sticking it to "the man" by wearing hoodies to NYC, even though it is a sham to suck in a gullible counter-culture, because by making the decision to go public they have already sold out to the very "Establishment" they are mocking. This is just like the Hollywood celebrity that flies cross-country to the Greenpeace or NRDC/Sierra Club Global Warming fund raiser in a cozy Gulfstream 3 (or better) private jet, dumping god knows how many tons of emissions into the atmosphere.
- Maybe find companies with founding executives who have some gratitude for the US financial system and the opportunities it creates that don't need to renounce their citizenship in advance of going from wealthy to fabulously wealthy so they can live a million lifetimes of luxury rather than just a hundred thousand by avoiding taxes.
Too much to ask?
Oh, and P.S....try some damage control and do better not to come off like the greedy, cheating, manipulating b**tards American investors have come to expect that you are.
I never joined facebook, and now, glad I didnt...
Saw how much time others wasted on it...
One thing that I Dont like is when, the MSNBC and Yahoo folks
ONLY let people post comments using facebook...?
"Suckerburg" needs to project an image, other than wearing T-shirts and hoodies that is different than looking as if he just got done changing the oil on his VW.
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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