Facebook fiasco is disgraceful

In all my years on Wall Street, this is the most outrageous and egregious deal ever.

By Jim Cramer May 23, 2012 8:51AM

This Facebook (FB) fiasco is a disgrace.


The idea that big clients were getting the skinny that estimates were too high, something that would justify immediately cancelling orders or dumping stock into the public frenzy, is just plain outrageous. Anyone who made such a call knew that was selective disclosure, a clear violation of SEC rules. Anyone who acted on it has to be subpoenaed immediately by the SEC to find out what happened. The repercussions should and must be severe, as such a number cut on the eve of the deal is something everyone had to know -- not just the big boys.


Is there any wonder that there was such a vacuum after the deal started? Anyone who wasn't able to scale back on the number cut got a once-in-a-lifetime opportunity to pick off the public at $42.


Heads, the insiders who were selling win; tails, they win. Heads, the big mutual fund clients who were selling win; tails, they win.

You got the chance to print money with that call.


More from TheStreet.com

Who knows where the deal should have really been done knowing that cut. I can tell you this $38 would have been ludicrous unless you really just wanted to blast the unsuspecting public as well as the Morgan Stanley retail network, which was overwhelmed with stock it didn't want at the last minute, perhaps because of the new selective disclosure.


Making matters worse, of course, is that the smaller investors who got stock would most likely be selling through the wholesalers like Knight, and it appears that the Nasdaq glitch specifically hurt the people who decided to get out of the deal on the pop. I know the right of the flipper to flip isn't the most hallowed, but the big boys got the $42 price directly. It was the little guy who was disenfranchised if he got stock and tried to sell.


Oh, and those who actually bought on the deal? We now know that many didn't even learn they owned it before the stock was well below the offering. Those were the Monday sellers with the really late reports.


All of this stinks, of course, but none of it stinks more than the idea that the Morgan Stanley analyst cut numbers at the last minute and only the largest clients were informed.


If that's really the case, then the SEC has to go to Morgan Stanley on Wednesday and get all telephone records, all transcripts, all correspondence and start sifting, because there's no way this didn't violate the rules.


In all my years on Wall Street, this is the most outrageous and egregious deal I have ever seen.




And now someone has to pay.


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust, and has no positions in the stocks mentioned.

May 23, 2012 9:29AM

Hey Jim,

I think you have a little to be disgraced about here too.

You were like a cheerleader for the FB IPO on CNBC all day Thurs. and Fri. Morning. (along with the rest of the CNBC commentators)

Now you are on the Slam FB bandwagon. (along with the rest of the CNBC commentators)


Reminds me of watching Brent Mussberger (aka brent marshmellow) call a college football game.




May 23, 2012 9:36AM
Cramer is a complete idiot.  Facebook was started by a thief.  It's main assets are in taking people's personal information and selling it.  It's involved in numerous patent lawsuits against it.  This is a stock that even the most uneducated of people knew was a bad idea; a stock that Cramer himself was recommending to people.  Seriously, anyone who bought this stock knew what kind of people they were getting in bed with.  Now you have all these people who like to call themselves experts feeling like they were taken for a ride.  We know who facebook is; we know the banks can't be trusted.  Stop complaining that you bought a five dollar hooker and ended up with an STD.
May 23, 2012 12:24PM
Take your money out of the big banks and put it into your own neighborhood savings and loan !! That way you help your neighbors get loans and your not supporting the thieves !! Dump Bank of America and Chase and the rest ..invest in yourselves and your town !!!
May 23, 2012 12:28PM
In the past when I have said that the small investor is the swimmer whose been thrown  into the shark tank with a cut on his leg, people said I was a conspiracy theorist.  I feel that the recent downturn in the economy has turned the investment arena of wall street into a pyramid scheme.  It does sound like a conspiracy theory, but I believe that it's truly happening.  The outrageousness of this recent event is proof that the big firms really do want to strip the funds from the small investors to the betterment of the large investors.  It's a shame that this happened just when people were starting to feel like they might want to dip their toes back into the water again.  To publicly get them bitten off by the sharks again is sad.  Even if the big boys get punished for it, it still furthers my opinion that it is not a fair playing field.
May 23, 2012 9:52AM

Agreed, Montands. CNBC was selling the HYPE, so people would tune in to their station to find out the latest hot nugget of information. Cramer is guilty of that also, but he, like the rest of us didn't have access to the last minute dissemination of valuable information. I do have to commend him speaking out, even if it is only to give his sorry bee-hind some shred of credibility and keep people watching his show.

The market is an insider game, and only the big players get the benefits.

Re-instate Glass-Steagall NOW!!!! Stop the insanity. The investment banks can not be allowed to steal from the public to make their bonus any longer!

May 23, 2012 10:19AM
Yeah, yeah , yeah...surprise surprise. 

I watched as MSN and other media outlets shamelessly hustled the IPO, more intensely as it drew near.  "Buy FB, if you can even get it!!"  Now they're running for cover and silly enough to think we can't remember what they said a week ago.

And yes, nothing changes with Wall Street or the banks.  Same old story---the fix is in. 

This is because Washington, D.C. and the politicians are owned by the financial system.  They do a good job of finger wagging and scolding, but it is mostly a pretense with a wink and a nod.  How many have actually been held accountable from the 2008 debacle?  A couple sacrificial lambs?

This type of thing would not happen in 2012 after the economy was almost destroyed by the banks in 2008 unless there was complicity by the political system.

May 23, 2012 11:26AM

Oldest scam going.  What does this company really do???? Bigger than McDonald more valuable than Coca Cola ???      People have to be real idiots to buy this junk.......it is junk stock worth less than $3.00

No track record...no assets.......all hype   SCAM  SCAM  SCAM



THE NECK  AGAIN               

May 23, 2012 9:25AM

Great, tell me something I didn’t know Friday by 6:00 p.m. just by looking at the FB trading price chart for the day. Here’s something more; Facebook insiders and senior managers were in on it from day one. And Goldman’s fund structure for distributing Facebook ownership to smaller investors is a scheme to circumvent SEC regulations. All of these folks should also be on your list of people who should now go to jail. This whole IPO was a shotgun blast of scams from beginning to end.

May 23, 2012 9:23AM
I am a retired working stiff, and even I knew that Facebook was way overvalued. The big financial institutions such as Morgan Stanley as well as the insurers continue to do business as usual. The analyst who gave a downgrade just ahead of the IPO, either had tremendous hutzpah to go against his superiors, or, he and his superiors saw a chance to ..............you know the rest.
May 23, 2012 12:20PM

I hope my 401K managers did not buy any of this junk.


Sigh, but they probably did.

May 23, 2012 12:09PM
After all the bitchin and whinin is over...nothing will be done AGAIN..Wall St. will keep on ripping us off and the sheeple will take it in the a-- again...It's time to start stock pilling up the ammo people !! Before they come for your last dime...
May 23, 2012 3:41PM

Even if the regulators get involved, so what. Unless somebody actually goes to jail, it's pretty much gonna be like this - "Ok Mr. Wall street criminal, you have stolen from the American people with impunity, you scoundrel. Now you know the rules..just give Congress their cut..er penalties and fines, we'll very publicly slap your naughty little hand..(and we'll both laugh all the way to the bank).." says the idignant congressman!

These Fraud street criminals don't even pretend it's gambling anymore, it's just a government sanctioned mugging of the peasant, er muppet..I mean middle class.

May 23, 2012 10:16AM
Unfortunately this epitomizes what corporate and political America is all about!!!!!!!!!!!!!
May 23, 2012 10:50AM
If my memory serves me correctly, Martha Stewart went to prison for a very similar act.   She only made about a quarter of a million on her indescretion.    Seems like the billions lost on "Disgracebook" should send a few hundred people to jail.   
May 23, 2012 5:10PM
facebook belongs in the trash dump thats where it belongs
May 23, 2012 9:41AM
Im just happy I was not able to get in, Already lost alot the last 2 years to lose more to this major SCAM. Facebook founder should have just given his employees $1.3 million himself instead of scamming the public into doing it. He has the money to do it. Funny how rich people always trying to use other people's money.. Trump always said never use your own money.
May 23, 2012 12:15PM
Like I said on this blog last week- STOCK is what BIG FISHES use to catch little fishes!! Invest your money in a new mattress and stick it in there.
May 23, 2012 5:35PM
The stockmarket is a tool for the rich to fleece the poor, and do it legally.   Facebook a failure of epic proportions.
May 23, 2012 4:53PM

In my opinion, an overwhelming majority of those that make a living off day trading/gambling contribute nothing to the output of this nation. Nothing wrong with trying to make a few extra bucks on the side, and perhaps improve the retirement years, but good luck if you are trying to game the system. Once a week stocks decline on Euro worries, goes up for a day when housing sales improves; takes a dive for a few days on bad employment numbers, and so on and so forth. For the last 20 years the stock market has been much more about short term gains for large investors and less about long term stability and viability for companies and their ability to provide a stable outlook for the smaller investor. The shell game continues...

May 23, 2012 10:48AM
cnbc,morgan stanley,goldman,madoff,kiernan,krudlow,lips bartiromo,facebook the list goes on. the evidence is obvious who the crooks are-When does the jail doors open?
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