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Facebook IPO Fallout

Thursday, May 24, 2012

Facebook "Like" (Sean MacEntee/flickr)

Forbes managing editor Bruce Upbin discusses the initial poor performance of Facebook stock, why shareholders are suing the company, and why regulators are investigating possible wrongdoing.

Guests:

Bruce Upbin

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Comments [25]

superf88

The info was publicly available on the SEC website -- yet major investors didn't bother to read it -- and now claim to have been shafted? Hah!

would love to hear what the analysts and reporters were doing instead of getting the info they needed to help investors make intelligent basic decisions. There is no case.

May. 24 2012 04:54 PM

hmmm... FaceBook®, the new Friendster™ which was the new MySpace™... already seeing considerable backlash from young, potential users... run by a 28 (!) year old ego MANIACAL tech nerd who is retaining a 60% share and won't be a told anything by any board or shareholders...

...sounds like an incredible investment opportunity.

Pets.com, anyone???

May. 24 2012 01:14 PM
Edward from Washington Heights AKA pretentious Hudson Heights

I just hope george soros lost a lot of money.

May. 24 2012 10:46 AM
Shawn from Bergen County

Brian - no one wants a "first day pop" other than the retail investors. FB and Morgan Stanley sure don't want a "first day pop". That means they lost a boatload of money.

Wally - the real insiders, like Zuckerberg and other people at the company, can't sell. There are rules associated with that. They will sell later, but they can't sell right now. All their worth right now is on paper.

May. 24 2012 10:35 AM
Edward from NJ

Filing with the SEC *is* making information public. If you don't know how to look at SEC filings, don't buy individual stocks or play IPO games. If you aren't willing to do that kind of research or pay someone to do it, buy and hold index funds.

May. 24 2012 10:32 AM
Shawn from Bergen County

I think most people don't have an understanding of how an IPO works.

The price of the IPO is set to make money for the company. If FB sells 1 million shares at $38, they make $38 million minus any fees associated with the IPO. This is a way to generate money for the company, only. When a company lists its securities on a public exchange, the money paid by investors for the newly issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). After that, the people who bought shares make or lose money based on the price of the stock. But the underwriters and Facebook the compay want the IPO to be as high as possible. They make more money that way. If they price an IPO at $30 vs $38, they make less money. This is purely to create capital for the company to use. This just goes into their bank account to buy stuff with and to run the company.

So these guys did exactly what they were supposed to do. Create as much money as possible through an IPO so that FB gets a huge payout to run the company. Anyone who bought FB expecting this stock to go to the moon 3 days in is just delusional, and they deserve what they got. The only people mad about this are day traders and people looking for a quick buck. If you bought in and are long on FB then you don't care what the stock does in the first 3 days.

May. 24 2012 10:30 AM
Martin Chuzzlewit from Manhattan

If Zuckerberg will agree to a big donation to OBAMA 2012, Axelrod will arrange a bail-out for the stock.

May. 24 2012 10:24 AM
Brian from Hoboken

Surprise surprise. Financial rules allow the big guys to get information that Joe Investor can't get.

I would think most people realize that they can lose money on an IPO. But the issue is that investors were subject to essentially a bait and switch.

The initial price set by Morgan Stanley was too high. The IPO advisers have to walk the fine line between setting it low enough to generate interest and get that first day pop, but high enough to make money for the Facebook founders and stakeholders to make money. Morgan Stanley priced it too high.

May. 24 2012 10:24 AM
Manna

Just look at this sorry "IPO". So typical of US business now - it doesn't make anything, the only thing it does is waste people's time. China will continue to laugh at us.

May. 24 2012 10:23 AM
seth mosler

it is against the rules to "flip" ipo's from most brokerage firms. They have to be kept for 60 days and you have to acknowlege this before buying. So STOP Complaining!!! Sometimes you win sometimes you loose.

May. 24 2012 10:20 AM

The hysterical rage over Facebook's failure to soar to $50 per share in 2 hours is a perfect example of how Wall Street has come to believe that it has a _right_ to enormous profits.

The only surprise is that Obama hasn't stepped in to offer a 'bailout.'

The Economist has an essay on how there have been fewer IPOs for precisely the reason the guest notes. Rates of IPOs are way down over fifteen or twenty years ago.

The caller who is griping about how she didn't get the price she wanted is clearly — one — an amateur, and — two — an example of the right-to-profit mentality.

If she had bought an _option_ with a strike of $38, she would have been protected. But Americans are complete idiots about stock markets and Wall Street is leading the way.

May. 24 2012 10:19 AM
lin from NYC

I understand that the look of a great deal especially with a high profile company like
Facebook seems like a great place to invest; however, given the recent past re
major investment firms including banks why aren't people more careful about
where they place their money? I hope the shareholds win the classaction but
I think they should also take responsibility for not being more careful.

May. 24 2012 10:19 AM

Lady you were looking to make some money and you didn't ...oh well that's life.

May. 24 2012 10:19 AM
Robert from NYC

Does this Bruce guy understand anything?!!! Where did you find this guy? Diane got screwed. Tell Bruce to prepare better before the show.

May. 24 2012 10:19 AM
Robert from NYC

Well if no one was notified that it was "public" on SEC website then it really wasn't "made public"! It should have been announced somewhere in initial advertising of the ipo that the terms are available on SEC website for all to see. That's what I call public.

May. 24 2012 10:16 AM
RL

martin, I guess you did a poll of facebk employees to know that they're all lefties??? nice try. greed knows no party. but if so, at least the left is not afraid to police their own. whereas the right just believes in whatever their leaders say. very sad.

May. 24 2012 10:16 AM
Martin Chuzzlewit from Manhattan

The Senate is holding hearings on the Facebook IPO?
The Senate !!!???
The Democratic led Senate which hasn’t passed a budget in 3 YEARS!!!!???
The Democratic Senate which just voted 99-0 against their own President’s budget proposal?
Don’t they have more important work to do than mirror their own President’s poorly veiled anti-business animus?

May. 24 2012 10:14 AM
seth mosler

Quit complaining!!! Who says all IPO's are supposed to go up? It is a gamble and the people who gambled lost. There are never guarantees in an IPO and why would the FB owners issue a stock that was to low and then went up? They want to maximize their investment. Grow up-most IPO's go down. People are only complaining because they lost money.

May. 24 2012 10:14 AM
Wally

Does anyone really trust facebook? The whole thing gives me the idea that it's a scam. I think the insiders are dumping their shares - now they got rich, get out and move on. That is EXTREMELY telling.

May. 24 2012 10:14 AM

The SEC won't be the saviour....

May. 24 2012 10:12 AM
Martin Chuzzlewit from Manhattan

So the little Leftie weenies at Facebook lied and shafted the public just like the evil guys at Bain, LOL?

May. 24 2012 10:10 AM
Henry

Oh wait - the SEC is on this? There's a guarantee nothing will happen.

May. 24 2012 10:08 AM
oscar from ny

The greed of these ppl is godlike,..these demons can steal and sell or trade ppls ideas and claim it as if god gave them power or intelligence from beyond...than they take their money and invest it in terrorism nd build their moskes for baal....these individuals lie to every generation sfter the next, only in their brains god allows for these demons to live in luxury while real innovators, artist, teachers etc are unwelcomed, hidden and sometimes persecuted...

May. 24 2012 10:01 AM
Marcus from NYC

The tech community has been saying it's shares were way overvalued from the get go. It's only revenue model is from ads and nobody clicks on. Even with future expansion into the mobile market, Facebook is still relying on click on advertising. Also, many say the numbers of actual users is way under 900 million.

May. 24 2012 08:52 AM
Brian R. from Red Bank, NJ

Brian-

The typical trend for high profile IPOs over the last 20 years has been that they are issued and rocket up immediately. This creates instant wealth for the shareholders (most notably founders) who got in at the basement price. The one entity, ironically that looses out in this arrangement is the company. In a perfect world there would be no movement at all in a security after its issuance and thus the company would realize maximum return for itself. Investors are so used to getting a bargain that we've forgotten that the purpose of an IPO is to raise money for the company!

As for the charges that information was withheld from investors prior to this specific debacle, we can only hope that it was and that regulators have the guts to finally arrest someone under RICO for financial collusion. Lord knows it's never going to happen over the mortgage crisis!

Thanks in advance for a great show.

May. 24 2012 08:34 AM

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