Wednesday, 23 May 2012

Facebook. Shares Fall, Nasdaq suffers, Wall Street Shamed and now a major investigation. It doesn't get any worse.

In what was to be the greatest IPO ever, nevermind for a tech company, the Facebook IPO has really become a loser and beginning to be despised.

With the price falling to new levels today (-18%) and the only people who made money are the early investors (Facebook people themselves) it's a disaster.

Add to that, the intervention by the Brokers to prop up the price at 38 usd meant they're left with shares that are now in starting into freefall. Nobody wants these shares and already it looks likely to have cost Morgan Stanley 2 billion usd+.  

Add to that the 30 minute Nasdaq delay which has now resulted in a series of class action suits.

“It’s dreadful for the markets,” former SEC Chairman Arthur Levitt told Reuters of the IPO and its handling by Wall Street banks and Nasdaq. “It’s an event with long-lasting negative implications for an industry that can ill afford this kind of blemish, and the last chapter hasn’t been written. Nobody looks good here".
And today it just got worse.
Just when you thought it was as bad as it gets, 'Time' magazine reveals an IPO "probe"/investigation. This is serious stuff.
What's being reported is that just days before the IPO, analysts lowered their forecasts for big clients after receiving briefings from Facebook executives that cast doubts about the social networks financial prospects.
Probably not illegal as such to lower a forecast but if proven, it could show insider knowledge which was used to the benefit exclusively of big clients of big banks. And that's a whole heap of problems. In other words, they used priviledged information for their own benefit.
So a shining IPO has quickly become a total debacle with further rumours now, on foot of the investigation, that Wall Street looks after Wall Street and it's basically a game, rigged against the ordinary investor.
I remember before The IPO I was involved in, Brokers buying shares themselves at the lower pre-ipo price and then passing them to clients at a profit. In other words giving advice to clients to buy a share, simply because they were selling them, unbeknownest to the client. And I was told it was illegal which clearly it is. But it was widespread from what I experienced.
IPO's are an opportunity to make big money and so that leads to corruption. It has to anywhere there's money like there is around an IPO.
But this has damaged Facebook seriously already and it could get worse. And it has damaged investors, Nasdaq and Wall Street.
But it's now beginning to expose questions about whether Wall Street is corrupt.
Which it is. Was. And Always will be.