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More FB Woes

Friday May 25, 2012

In the movie, and real life,  Bugsy, Ben Siegel sells more shares of the Tropicana, the first ever big casino constructed in Las Vegas. One mobster notes that 'we will have to deal with these people, some of them are substantial.'

Well fast forward seventy years and the Wall Street mobsters are having the same problem with Facebook, too many shares that fell too low too fast. Now who's to blame?  Who exhibited the greater greed?

The FB insiders that happily sold to the late comers?

The Underwriters pricing the shares at 33 times ad revenue when Google trades for 5.5 times?

Underwriters like Knight Capital that are astonished the whole thing is up in smoke?

Investors ((pigeons?) who are holding the limp FB bag?

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One response to “More FB Woes”

  1. C Kingsley Avatar
    C Kingsley

    I have been following this story from a distance and without passion. There are a couple of things that becoming clear. The big issue is the underwriters telling thier big clients to not buy while on the “Roadshow”. This is the big legal issue becuase on the surface it smacks of insider trading or reather insider non-trading. The other issue that maybe considered a silverlining is that FB has effectivly burst any resurgence of Dot.com bubble. Consider angies list which has never shown a profit and how high and far it soared. It brings up the interesting question if a company is offering stock to raise money, wouldn’t it make more sense for the company to issue this stock as high as possible? It is not like Angie’s list recieves more money once the stock is sold on the secondary markets. The secondary markets are purely for the insiders and speculators to make a quick buck and get out fast. FB, if not for insiders not buying at all, would have raised as much money as the market was willing to let it raise with little or no room for speculators to make a killing. In summary there are some serious questions regulators need to answer, and there are some market answers that have been provided which just might save millions of “day” traders money in the long run and prevent another bubble burst.

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