Face(palm)Book

[Cajuncowboy]

You are right .. a fool and his money are soon parted. I do not blame Facebook for what they did as the stock purchasers were not forced or mislead into buying Facebook stock. In this case, though, a lot of first time stock investors fell prey to the hype based completely on the idea that "Everyone I know uses it!" Their fault? Absolutely. Does that make it okay? Not really.

#reality

I guess the question would be was it ethical. It was okay in the sense they did nothing illegal. The SEC investigation will turn up some other information and we will see if it was all on the up and up.

 

[Cajuncowboy]

They did. They knew Facebook wasn't worth $38 a share. The only people who would have bought it are people that didn't know how to do the math. It's like scammers scamming old people out of their retirement. Either way, it was dishonest and screwed people out of their money.

People who buy overpriced tickets, know they are overpriced. People do not buy stock that is overpriced intentionally. People buy stock to make money, not to lose money. People by overpriced tickets as a luxury.

Then it is their fault for not doing their homework. Don't play in a den of vipers if you don't know how to handle them. This was the fault of the investors, not really the fault of FB.

 

[YosemiteSam]

More news.

Not that I couldn't see this coming.

============================

Zuckerberg, Morgan Stanley sued over Facebook IPO

Facebook Inc Chief Executive Mark Zuckerberg, and several banks led by Morgan Stanley were sued by shareholders, who claimed the defendants hid the social networking leader's weakened growth forecasts ahead of its $16 billion initial public offering.

The defendants were accused of concealing from investors during the IPO marketing process "a severe and pronounced reduction" in Facebook revenue growth forecasts, resulting from increased use of its app or website through mobile devices.

Complete Story

 

[YosemiteSam]

Then it is their fault for not doing their homework. Don't play in a den of vipers if you don't know how to handle them. This was the fault of the investors, not really the fault of FB.

See above. That pit of vipers is about to get bit themselves.

Just because you can pull the wool over someones eyes, doesn't mean you can do it freely without consequences.

 

[Reality]

Facebook is a fad. Now Morgan Stanley is being investigated by the Fed because they did not parrot the common narrative. High ranking government officials made several references to how wonderful Facebook is the night before the IPO and the the day of.

Those that did not fall in line are now going to be punished. Real experts peg the stock at about $9 a share based on the revenue they generate.

I am sure everyone noticed the Zuck immediately dumped 30 million shares and for a billion dollar profit. I wonder how many unions and pension funds bought in?

Reality mentioned the .com bubble of the 90's, but apparently many people have the memory of a fruit fly and bought in anyway. Dumb people make it easier for the rest of us to make real money.

Back in the late 1990's, I had a major player in the DOT-COM industry want to buy a site I owned. He offered me millions in stock to acquire my site and a stock option package worth a lot more. Right from the start I asked for a financial statement and months later I finally got one. His venture had $60,000 cash on hand yet he promoted his company was worth more than a billion dollars. While I saw through it, several other similar sites like mine fell for it and a year later filed lawsuits to regain ownership of their sites.

People have no idea how IPOs and the stock market works. They assume when the bell rings you can buy stock at whatever the opening price is. They do not realize how many share orders are already queued and allocated prior to the IPO and that the price they pay will be a lot higher after those shares are transferred. The fact that the stock's price was pushed upwards immediately before the IPO launched should have been a warning sign.

#reality

 

[Cajuncowboy]

See above. That pit of vipers is about to get bit themselves.

Just because you can pull the wool over someones eyes, doesn't mean you can do it freely without consequences.

Well, like I said before, the SEC will investigate this. If they did something illegal then fine, but if not, then it is those who played with fire an got burned who is at fault.

Although, most of us who buy and sell stocks often could see this coming from a mile away. There is no inherent value in Facebook that justifies the IPO price.

And simply suing someone doesn't mean they did something wrong.

 

[YosemiteSam]

Back in the late 1990's, I had a major player in the DOT-COM industry want to buy a site I owned. He offered me millions in stock to acquire my site and a stock option package worth a lot more. Right from the start I asked for a financial statement and months later I finally got one. His venture had $60,000 cash on hand yet he promoted his company was worth more than a billion dollars. While I saw through it, several other similar sites like mine fell for it and a year later filed lawsuits to regain ownership of their sites.

People have no idea how IPOs and the stock market works. They assume when the bell rings you can buy stock at whatever the opening price is. They do not realize how many share orders are already queued and allocated prior to the IPO and that the price they pay will be a lot higher after those shares are transferred. The fact that the stock's price was pushed upwards immediately before the IPO launched should have been a warning sign.

#reality

Hence, make limit orders not market orders.

 

[YosemiteSam]

Well, like I said before, the SEC will investigate this. If they did something illegal then fine, but if not, then it is those who played with fire an got burned who is at fault.

Although, most of us who buy and sell stocks often could see this coming from a mile away. There is no inherent value in Facebook that justifies the IPO price.

And simply suing someone doesn't mean they did something wrong.

If they covered up forward financials, then they did do something wrong.

 

[Reality]

Hence, make limit orders not market orders.

Most people want the stock no matter what though

#reality

 

[JBond]

actually what it looks like is that MS did not tell everyone about this; only a privlidged few. THAT is what is wrong.

maybe...but I don't think so. After Zuck disclosed he was going to immediately dump 30 million shares they reevaluated the IPO.

"Morgan Stanley followed the same procedures for the Facebook offering that it follows for all IPOs. These procedures are in compliance with all applicable regulations," the brokerage said in a statement to CNBC.

"After Facebook released a revised S-1 filing on May 9 providing additional guidance with respect to business trends, a copy of the amendment was forwarded to all of MS’s institutional and retail investors and the amendment was widely publicized in the press at the time. In response to the information about business trends, a significant number of research analysts in the syndicate who were participating in investor education reduced their earnings views to reflect their estimate of the impact of the new information. These revised views were taken into account in the pricing of the IPO," the statement said.

http://www.cnbc.com/id/47523622

 

[Cajuncowboy]

If they covered up forward financials, then they did do something wrong.

Oh I agree. I'm just saying we don't know that for sure yet. My supposition is based on what we know. All this is right now is an accusation.

 

[theogt]

They should never have went public. They're going to way of *******.

They had to go public. They were going to start bumping up against SEC rules requiring the to register, so it only made sense to do so in an offering context.

 

[Cajuncowboy]

Most people want the stock no matter what though

#reality

I think novice investors get excited to "own" a piece of something that is popular and don't look at the reality (no pun intended) of the whole picture.

I bought into Ford a few years ago when it was around 5.00 per share. It has more than doubled since then. There was REAL value in the company and the stock. It was very low and worth taking a risk to get into for a large chunk of change. Compare to FB. FB has nothing tangible to sell unlike Ford that has a real commodity.

A good rule of thumb is to invest in companies that the vast majority of people spend their money on. Things like entertainment (I own Disney stock) food companies that have a long history (Because everyone needs to eat) and hard goods (like cars, mid to low end clothing companies etc)

Some people think they are going to be overnight millionaires with stock and more often than not they end up broke. Common sense is always a good barometer.

 

[Reality]

A good rule of thumb is to invest in companies that the vast majority of people spend their money on. Things like entertainment (I own Disney stock) food companies that have a long history (Because everyone needs to eat) and hard goods (like cars, mid to low end clothing companies etc)

That is sound advice!

Right after Facebook announced their IPO, I had a friend ask me if he should buy their stock. I told him to imagine if our local city decided to launch an IPO for the city's main park and asked him if that would be a worthy investment? He said no of course. I said tons of people hang out there regularly and the park makes money from vending machines and tennis court fees, so why wouldn't he invest in that idea? He said, "But everyone uses Facebook." I then said, so if everyone used the park ..." and he cut me off with, "I get it."

#reality

 

[Reality]

I think the problem with most individual investors is that they think of shares of stock as the investment, not ownership in the company. It's like someone buying a baseball card because they think the baseball card will be worth more in the future. Baseball card investors never think about Major League Baseball's future, only that of the player on the card.

Stock investors are the same way. In most cases, they do not look at the company. Instead, they look at the stock share's potential or recent trends and invest in it. The only association they have with the company is when they can tell their friends and family, "Yeah, I own shares of their stock!" Beyond that, it's the shares themselves that matter. Owning 10 shares of Facebook would be like owning 10 copies of the same rookie baseball card that you paid $38 for. If at some point, the card is worth more than $38, you are a savvy investor. If the card's value drops into single digits, you wasted your money on magic beans.

#reality

 

[JBond]

They had to go public. They were going to start bumping up against SEC rules requiring the to register, so it only made sense to do so in an offering context.

Could you expound on this idea please? Why are private companies forced to become public companies? Your answer may be educational for more people than myself.

 

[theogt]

Could you expound on this idea please? Why are private companies forced to become public companies? Your answer may be educational for more people than myself.

I won't get into too many legal specifics, as that's just opening up a can of words, but basically there are two ways a company can "go public". An initial public offering that is registered with the SEC is one way. That is what the vast majorities of companies do.

Also, if a "private" company is large enough and has a certain number of shareholders it is essentially deemed to become a "public" company such that it's required to register with the SEC and file public reports like other public companies. These rules are the only reason that Google went public for example. In 2011, the SEC began inquiries with Facebook about whether or not they would need to register because of these rules. It was inevitable that they would need to register, but going ahead and doing so in the form of a public offering has the benefit of raising capital (and providing liquidity to your existing shareholders), so that is what they did. They didn't really have much of a choice.

But that's not why they're getting bad press now. They're getting bad press now because the bankers priced the offering so high (and so large). They were able to do that only because there was enough demand to do that. Everyone and their dog wanted to be able to say that they bought into the Facebook IPO. But they didn't necessarily want to hold onto the stock long-term. So you had huge demand at the launch (or, rather, pricing) of the IPO, then later demand died down and the price dropped.

 

[JBond]

I won't get into too many legal specifics, as that's just opening up a can of words, but basically there are two ways a company can "go public". An initial public offering that is registered with the SEC is one way. That is what the vast majorities of companies do.

Also, if a "private" company is large enough and has a certain number of shareholders it is essentially deemed to become a "public" company such that it's required to register with the SEC and file public reports like other public companies. These rules are the only reason that Google went public for example. In 2011, the SEC began inquiries with Facebook about whether or not they would need to register because of these rules. It was inevitable that they would need to register, but going ahead and doing so in the form of a public offering has the benefit of raising capital (and providing liquidity to your existing shareholders), so that is what they did. They didn't really have much of a choice.

But that's not why they're getting bad press now. They're getting bad press now because the bankers priced the offering so high (and so large). They were able to do that only because there was enough demand to do that. Everyone and their dog wanted to be able to say that they bought into the Facebook IPO. But they didn't necessarily want to hold onto the stock long-term. So you had huge demand at the launch (or, rather, pricing) of the IPO, then later demand died down and the price dropped.

Thank you. That makes sense. I agree the hype around facebook was bit out of hand. I am not sure which firm handled the IPO but clearly they made some errors, intentional or otherwise.

 

[theogt]

Thank you. That makes sense. I agree the hype around facebook was bit out of hand. I am not sure which firm handled the IPO but clearly they made some errors, intentional or otherwise.

Morgan Stanley, JP Morgan and Goldman Sachs were joint book-runners on the deal. You can see the full list of banks here.

http://www.sec.gov/Archives/edgar/data/1326801/000119312512240111/d287954d424b4.htm#toc287954_19

Ultimately it was the company's decision as to how to price and size the deal, so they deserve as much blame, if any, as the banks. I'm not sure anyone deserves blame, though. The people that bought into the IPO did so at a price they were willing to pay. And later sold at a price they were willing to sell at. In 6 months the price may be 20% higher than the IPO price. That's just the nature of valuing equity securities.

I don't ever buy into IPOs. And I don't "trade" securities. I would think most individuals would want to buy something and hold it -- i.e., be an investor, not a trader -- so as not to worry about short-term fluctuations in price.

 

[casmith07]

I won't get into too many legal specifics, as that's just opening up a can of words, but basically there are two ways a company can "go public". An initial public offering that is registered with the SEC is one way. That is what the vast majorities of companies do.

Also, if a "private" company is large enough and has a certain number of shareholders it is essentially deemed to become a "public" company such that it's required to register with the SEC and file public reports like other public companies. These rules are the only reason that Google went public for example. In 2011, the SEC began inquiries with Facebook about whether or not they would need to register because of these rules. It was inevitable that they would need to register, but going ahead and doing so in the form of a public offering has the benefit of raising capital (and providing liquidity to your existing shareholders), so that is what they did. They didn't really have much of a choice.

But that's not why they're getting bad press now. They're getting bad press now because the bankers priced the offering so high (and so large). They were able to do that only because there was enough demand to do that. Everyone and their dog wanted to be able to say that they bought into the Facebook IPO. But they didn't necessarily want to hold onto the stock long-term. So you had huge demand at the launch (or, rather, pricing) of the IPO, then later demand died down and the price dropped.

Great info, thanks for that.