Facebook's horrendous debut

This deal ultimately will go down as one of the worst-executed IPOs ever. Given all its problems, this stock is a sell, sell, sell.

By Jim Cramer May 21, 2012 8:34AM

What the heck happened with the Facebook (FB) deal? In the old days, you would have had to canvas the customers one by one in order to find out, and you wouldn't be able to reach enough people to really know.

 

These days, it's very different. I have more than 500,000 followers on Twitter, and I'm being deluged with people who didn't get their orders filled, still don't know what they have and aren't sure if they are long or short.


This deal, when the smoke clears, will go down as one of the worst-executed initial public offerings we have ever seen.

 

Now, I am sure that all of the companies involved will (1) disclaim any problems (2) find a way to say it was the best offering ever and (3) say that, given the demand and the volume, it was handled extremely well.

 

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Here's the issue, though: All of these people who are complaining can't be wrong. They didn't all make it up, and they aren't all griping jerks. Should we just ignore them?

 

Look, someone blew the opening. Someone didn't have control over the deal. Someone was negligent. We just need to know what happened here.

 

You see, with these Twitter comments, I am not pointing fingers. The people are. The people can no longer be ignored just because they are little, or not JPMorgan Chase (JPM), or because they are rich private clients of Goldman Sachs (GS). Someone must answer to these people.

 

But you know what? I am so jaded and cynical these days that I figure no one will. The process is hard enough, and the regulators are not sophisticated enough to do anything other than say, "Hey, it went pretty smoothly."

 

They will get away with that, because the press doesn't have subpoena power.

 

Now, on the deal itself, and why it was so sloppy, here's what I am hearing. Regardless of what the brokers were saying about demand, it was not tight at all. Regardless of what Facebook told Morgan Stanley (MS), which amounted to something like "Let the real people have it," the real people didn't expect it -- that, or they didn't want it nearly as much as the Facebook gazillionaires thought they did.

 

There were plenty of brokers who couldn't fill the supply, not the demand. That's why I was so adamant on "Meet the Press" (video) that you need to be a seller. It was that, as well as the fact that all of these social media deals are busts, and the ones that don't stay at a premium to the deal are real busts.

 

In other words, given the lack of demand on the opening day, given the lack of faith and the anger that the IPO process engendered, and given the fact that Facebook is now just one more stock caught up in the fiasco that is Greece and the coming tragedy that is Spain, the stock is a sell, sell, sell.

 

Do you think any one of these underwriters can recommend it up here, given the metrics and the worries -- yes worries -- about the next quarter?

 

I don't think so.

 

 

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 is long JPM.

82Comments
May 21, 2012 11:06AM
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Thank you to all who have become followers on Twitter!

 

Just a quick follow up to my FB posts from last week. There was a story posted Saturday about FB forcing a picture of a child with a birth defect to be removed from the mothers FB page. This is just the type of action that can and will land FB in the dog house. A bunch of spoiled little rich kids want to censor the content on toy.

As a publicly held company this is not acceptable; and very possibly illegal from the standpoint of discrimination. Hopefully the loving mother of this child will take legal action and all of you FB users will make your voices heard to correct this.

Who is banned next-People of color-The Elderly-Those of certain sexual orientation?

Will Barry make sure that his equal rights for all includes those with birth defects and instruct the AG to file suit on behalf of all children with birth defects?

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facebook is just another .dot money maker for it's original owners and will crash and burn

 

look most facebook users are young and have no jobs and if they have a job they are paying off $120,000 college loans and have no money to spend.

 

there is no money in facebook.

 

Why do you think it's a free service they would go under if they charged and what ad person would advertise on a system that has no uses that have money.

 

 

May 21, 2012 9:21AM
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Hey Cramer; a couple of weeks ago, you were recommending that we get in on the IPO. I hope you remember.

May 21, 2012 10:16AM
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My Space, what happened to them? Disappeared? Facebook could be the same over time.
May 21, 2012 9:24AM
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The only demand for this dog is from the underwriters.  The average investor has too many questions about this stock and is not falling for the media hype.  2008 wasnt that long ago and the wall street criminals are still in business and have not paid for their crimes.
May 21, 2012 10:26AM
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Facebook is like Fools Gold. Its looks like the real deal. But in the end its not worth much.
May 21, 2012 10:10AM
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Zuckerberg got his money, now the underwriters are sitting on all the shares.  Common people without unlimited funds are wary now because of the economy.  They will only invest in something sound.  Since FB makes it's money selling your information, I wouldn't call it sound.  You watch, the FB Board of Directors will start applying fees to things and then it will completely flop.

It's not that is was poorly executed, people are finally using some common sense and intellect when making financial decisions now.



 
May 21, 2012 11:10AM
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Another example of the game is rigged. cnbc,regulaters,crony capitalist,underwriters etc etc decide who wins and who loses. political hacks/shills (kiernan,drugster kudlow,lips bartiromo) pick the slant they want to promote and use the bully pulpit to enrich themselves and their masters. small investors,like myself,swim with crooks who use their power to steal.lock them all up and level the playing field so we can make some money.
May 21, 2012 9:12AM
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Once the underwriters get fed up of tossing their 7% fees at the sellers facing real cash losses at the $38 bid then this dog is off down to $20 before year-end.  FB - Fido's Bust!
May 21, 2012 10:26AM
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So far I have been right, you would have to be an idiot to buy this unless you shorted it!!!!!!!!!!!!
May 21, 2012 9:30AM
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They're houses are still sitting on shares. The propaganda didn't work. The insiders got rich and they're gone.
May 21, 2012 12:39PM
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It doesn't take a rocket scientist to know that Facebook is not worth more than General Motors or McDonald's.  Alas, the bubble has popped.  Now we can get on with real life.
May 21, 2012 10:22AM
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another stock market scam and what is fb selling anyways im going to start @ssbook  for the anti fb people put a picture of their @ss on it so everybody can kiss it
May 21, 2012 12:40PM
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Saw this coming a mile away. I thouht you're supposed to buy low and sell high. Well, they kept working on making it higher and higher and higher.. and now, it's tanking.

 

Myspace was a fad right? Facebook is no different. Besides the annoying games, surveys, spammers, viruses, ads, information mining... yeah. Totally saw this coming. I'm ready for the next new social site to replace this one, as FB  did with Myspace. What a bad investment people!

May 21, 2012 10:06AM
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One of the best comments I've read about Facebook shares is the 'dumb' money that will pour in as the 'smart' money leaves.


It seems that is exactly what we are witnessing, but hey it's only been a day.  Much bettter stories will be written in a month's time, when it will be obvious and 20/20 hindsight.

May 21, 2012 12:52PM
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Wow, the investing public is smarter than I thought.  It saw through the smokescreen of the movie set facade hype (incl MSN and other media outlets) and figured out there is not a real, tangible product behind FB.  Its value is only the short shelf life of the data it collects for marketers under  the guise of providing a service.  It needs a constant stream of new users to feed the model.  And as GM proved, the revenue return from FB advertising ain't happening---at least for them.

The way FB has treated its subscribers---

- with evermore invasive and creepy Orwellian privacy policy changes
- the I-don't-give-a-crap attitude of its CEO toward the IPO
- the renouncement of citizenship by a co-founder ungrateful to what the U.S. free market allowed him to do (and could have lived a thousand lifetimes of opulence even with the U.S. tax burden)

etc

All should be red flags to anyone who has a nickel to invest.

May 21, 2012 12:10PM
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If it sounds too good to be true ... it probably isn't. There is and never has been a free lunch... and this unbridled salivation over FB is simply meeting up with reality.

 

Peace

May 21, 2012 12:38PM
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Facebook is trash so why buy into it at all.  They are thieves and hackers so let the market crash on their head for sure.  Get rid of facebook and life will be loads better.
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