Sunday, May 20, 2012

The Facebook IPO ~ Boom or Bust?


Label me underwhelmed by all the hype surrounding the Facebook IPO which started trading Friday on the Nasdaq. Built up into the Holy Grail of IPOs by the media analyists, they had to back-peddle by Friday afternoon when the stock didn't live to expectations. Duh - even a lay-person like me could have predicted that. Sure, investors still made billions, but as we see with Morgan Stanley, wax on, wax off - they can turn around and lose billions, too. And the only reason the price stayed above $38 a share was that the "underwriters" (banks) propped them up by buying their own product. So the whole thing feels rather shaky, and I wonder how strong the selling will be on Monday?
From Wall Street Journal:
The stock had been widely predicted to soar on its first day. Instead, up until the closing moments of the trading session, Facebook's underwriters battled to keep the stock from slipping below its offering price of $38 a share. Such a stumble would have been a significant embarrassment, particularly for a prominent new issue like Facebook, the most heavily traded IPO of all time.
In the end, the bankers succeeded. When trading on Nasdaq ended at 4 p.m., the social network's stock was up just a hair, 0.6%, at $38.23. . . .
Facebook's price began falling almost immediately after shares began trading. It is unclear exactly when Morgan Stanley stepped in, but traders said that the price movements throughout the day, with the shares occasionally touching the IPO price but never crossing below it, suggested the firm was active throughout much of the session.

David Callahan of Demos points out in the following video that while Facebook is generating lots of money, it is not generating lots of jobs. The wealth from the FB IPO is going to be held by the 1% and not spread around to the 99%. Yes, the Henry Ford assembly-line days are gone, as Maria Bartiromo squeaks with mock-outrage, but that doesn't change the fact that billionaires could find ways to spread the wealth around more effectively (if they cared, and there's no evidence that Zuckerberg cares about society at all).

I guess I'm cynical, but I see the IPO moment as the beginning of the end for FB. Rumor is that eventually Zuckerberg wants to charge people for business related pages and "extra security" that is sadly lacking now. As Netflix ticked off loyal users, so does Facebook, which touts security then nags people in a creepy way to share everything from phone numbers to geographical location. Zuckerberg apparently just wants to data-mine the world and then sell the details of our lives to the highest bidder. Plus, everyone knows that employers, schools, and even the police are using FB as a way to spy on people or play gotcha, so people constantly try to decide whether to keep pages open or close them down, and it's really not worth it.

In my opinion, and I'm not an economist but just an observer of human nature, this IPO may be happening just a little too late. Yes, there will be billionaires who build fortunes by selling out quickly, but some people - probably the small investors again, *sigh* - are going to lose a mint.

Talking Points Memo caught the Roller Coaster Feeling on Friday

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