The Facebook Debacle

Maybe Facebook should try adopting the phrase, “Don’t be evil.” Or maybe it would be better to state, “Don’t be greedy.”

My experience with the Facebook IPO comes with five-years of experience working on Wall Street. Is anyone really shocked at what happened? Well, we should and we shouldn’t be.

Wall Street is a big greasy machine (and feel free to replace greasy with just about any other pejorative term). So what happened a week ago today shouldn’t come as such a shock. But still it does, because at some level, we have to trust the capitalist markets that fuel our society.

I initially wanted to get in early on the Facebook IPO. After missing Google’s dutch auction, I didn’t want to miss another exciting technology company. However, and much to my chagrin, IPO shares are not initially available to the public, at least initially. Rather, they are offered to select account holders, possibly those with large net worth, or maybe even frequent traders.

Now, I’m glad I missed the boat, because who knew it was a sinking ship. But it’s not because of the price drop. Stock prices will rise and stock prices fall. But these peaks and troughs are usually based on earnings reports and market speculations, not because of a grossly over-valuation of a company. Shame on you Morgan Stanley, JP Morgan and Goldman Sachs! And shame on you Facebook.

The entire purpose of an IPO is to acquire new funding for future growth. That said, the stock price should closely reflect the value of the company. How the underwriters handled this valuation is disgraceful and places another red mark against an already tarnished Wall Street.

In the end, I eventually purchased some modest shares of Facebook stock, but well below the IPO price (even if the stock is currently 6% below even what I paid). I think the company is innovative and has captured the interest of the entire world. And now, I would like to see what they can do with my money.

Leave a Reply