Fadebook, Fakebook, Facepalm … or Farcebook?
Witty epitaphs for the disastrous Facebook IPO have included:
But is there more going on than just an IPO disaster?
Reggie Middleton alleges:
Facebook is falling like a rock despite the fact that there’s a short sale restriction on the stock until at least tomorrow. Why is there a short sale restriction in the first place? Exactly what is wrong with allowing market forces to find the true market price? Well, you can run but you can’t hide, Mr. Market equilibrium avoider.
Tyler Durden writes:
There was a time when an IPO simply allowed a company to raise cash: sadly it has devolved to the point where a public offering is a policy statement in support of a broken capital market, which however is fully in the hands of SkyNet, as yesterday’s chain of events, so very humiliating for the Nasdaq, showed. From a delayed opening, to 2 hour trade confirmation delays, virtually everyone was in the dark about what was really happening behind the scenes! As the analysis below shows, what happened was at times sheer chaos, where everything was hanging by a thread, because if FB had gotten the BATS treatment, it was lights out for the stock market. Well, the D-Day was avoided for now, but at what cost? And how much over the greenshoe FaceBook stock overallotment did MS have to buy to prevent it from tumbling below $30 because as Reuters reminds us, “had Morgan Stanley bought all of the shares traded around $38 in the final 20 minutes of the day, it would have spent nearly $2 billion.” What about the first defense of $38? In other words: in order to make some $67 million for its Investment Banking unit, was MS forced to eat a several hundred million loss in its sales and trading division just to avoid looking like the world’s worst underwriter ever?
And Michael Rivero argues:
There is no way that major Wall Street players ever saw the Facebook IPO as a long term investment. We are in all probability looking at a get-rich-quick “pump and dump”, but there may well have been an additional agenda at work.
We know the main players manipulkate the markets. The almost $12 billion poured into the Faceook IPO late Friday to prevent the price from going into the red represents one form of obvious manipulation. And there are many others, including the use of high-speed computer trading systems
However, because of the many years that the PPT has manipulated the stock market with their high-speed computer trading systems, savvy small investors have left trading, which means the actual flow of cash into the market has dried up. The PPT games shuffle what money exists around and around in circles trying to run up some impressive looking numbers, but the volume and the value is simply no longer there.
So, part of the reason for the major push for Facebook may have been to lure young investors into the market with the Facebook “brand”, rubes too dumb and inexperienced to know they were lambs to the financial slaughter, to form the new lowest level of the Wall Street pyramid scheme.
The value of such a re-invigoration easily explains why the major Wall Street firms turned a blind eye to Facebook’s inability to pay dividends on the IPO, and why Morgan Stanley, JPMorgan Chase and Goldman Sachs gambled nearly $12 billion late Friday to prop the price up.
If I am correct, and the Facebook IPO was intended to bait new investors into the stock market as a whole, then any major drop in Facebook value Monday will trigger a general market panic.