THE FACEBOOK IPO: WHAT DID RETAIL INVESTORS EXPECT FROM WALL STREET: TRANSPARENCY?

May 26, 2012 by · Comments Off on THE FACEBOOK IPO: WHAT DID RETAIL INVESTORS EXPECT FROM WALL STREET: TRANSPARENCY?
Filed under: THE FACEBOOK IPO 

 

 

WHAT IS A RETAIL INVESTOR? POGO SAYS THAT BE YOU.

 

 

On May 18thth 2012  Facebook  opened at $38 dollars a share. Initially the share price rose in to the low $40 range and then fell back. The lead underwriter, Morgan Stanley and others  had to provide a floor of support to keep the stock  just barely above $38 a share at the close of the first day. The stock has drifted slowly down ward until it closed at $31.91 a share  before the Memorial Day Weekend.

Initially the stock was extolled as to its future prospects during a private road show by CEO Mark Zuckerberg, COO Sheryl Sandberg and other company executives to institutional investors, mutual funds and other large investors who got to buy large blocks of stock at a negotiated price presumably below $38. The road show was organized by Morgan Stanley the chief underwriter.

Later a $38 opening price was offered to the public or retail investors geared to meet the $100 billion valuation (100 P/E ratio). This was based on Facebook’s recent annual profits of  1 billion dollars and its prospects for future profits based on its growing 900 million membership.

However the  stock price had weakened even before the offering. General Motors pulled out as an advertiser saying their ads on Facebook didn’t sell cars. Also there was a delay in executing sales, allegedly caused by a slow circuit breaker, on the day of the offering so buyers watched while prices went up before  they could consummate a sale and then watch as prices fell back after their purchase.

Most importantly after the road show, information came out shortly before the offering which was not shared with the retail investors that Morgan Stanley learned that new revenue did not increase as well with new members and that   many members used mobile devices to access their Facebook account. This meant the smaller screens on the mobile devices had less optimum space for advertising and many members tuned out ads anyway hence the G.M. withdrawal. Also as compared with Google Facebook gets .04 ad click throughs per million page views while Google gets .08. This information was not shared with the retail investors even while the wholesale investors sold nearly half their positions, an extraordinary large percentage. Thereby charges and lawsuits arose that there was a pump and dump scheme by those insiders privy to the advertising revenue information

Thus the $100 billion valuation of 100 times price/earnings  has yet to be proven. Google and Yahoo, more mature companies, sell for  about 20 times earnings. Other facts came out like Zuckerberg, 28, has 20% of the stock but 57% of the voting rights. He has the final say on matters. For instance he purchased, Instagram a company that has no profits, for  $1 billion dollars without getting the agreement of  his board.  Thus an investor has to put his faith in one person, albeit a hacking genius, to develop Facebook to meet its revenue and membership expectations. By now most of the astute wholesale investors have sold to the retail investors, probably on day one or shortly thereafter. Therefore the risk is on the retail investors that Facebook will perform as expected, a bet on the future with an unknown risk and sold under suspicious circumstances to the public.

Share

MITT ROMNEY: HOW DIFFERENT WOULD HE BE FROM GEORGE W.BUSH? ROMNEY WOULD BE BUSH III. Romney Has No Personal Record OF Achievement To Run On So He Has To Attack Obama.

May 8, 2012 by · 2 Comments
Filed under: Uncategorized 

ROMNEY AND BUSH:  PUBLIC ENEMIES ONE AND TWO

Mitt Romney doesn’t talk much about George W. Bush in fact he would like us to forget about the “Compassionate Conservative” who nearly destroyed the financial system of the country with his leadership. Nothing  is said about  the Bush who led us into two wars one in Afghanistan and the other in Iraq which many politicians and scholars think was unnecessary. Iraq left behind over four thousand dead and thousands of others scarred, brain damaged and debilitated for  life. This doesn’t include civilian deaths and casualties which still continue in Iraq.

The Bush that believed in American supremacy so much so that we didn’t care or need the support of allies in foreign policy matters is never mentioned. (Romney thought so  highly of this policy he named his recent book  “No Apology” meaning no apology to foreign allies for not consulting with them on major decisions.)  No mention is made of the the Bush who believed in a small regulatory government, a huge defense sector and that Medicare and Social Security should be matters for private sector investment . (After the recent bond market collapse one could guess where the retirement of millions of Americans would be if Social Security was allowed to privatize.)

Bush did expand prescription drugs for seniors to the great joy of the pharmaceutical companies. It was such a great idea that many congressional insiders rushed to buy pharmaceutical stocks so one wonders who really benefit from this. When Bush left office there were wars still raging in Iraq and Afghanistan, the National Debt which was nearly nonexistent when he took office was in the trillions of dollars, the highest it has ever been and of course an economy  in collapse.

Would a Romney government be any less of a disaster, answer no. Romney believes in the same principles as Bush. Despite all the parsing on issues in the primaries and now as the general election heats up Romney is still fundamentally on the same page as Bush. There may be slight differences in degree but we would get the same policies and the same cadre of loyalist Republicans now stowed away in conservative think tanks or in industry to serve in the cabinet and other appointed government positions.

Like Bush, Romney is for small government (translate as small regulatory government.) There would be light regulation of Wall Street under Romney just it was under Christopher Cox, Bush’s appointee to the chairmanship of the SEC.  Thus there was no one to put the brakes on to stop the last financial bubble. The Federal Reserve under the chairmanship of Republican and freemarketeer, Greenspan while not under the control of Bush but appointed by him,   refusing to use the Fed’s power to curb mortgage lending while subprime lending and securitization went beyond all rationality.

Romney is already on record in his primary speeches and his book that he would take the government back to the Bush years which enriched the top 20% the expense of the bottom 80%. Romney is one of those who benefited amassing wealth of two hundred twenty million dollars while paying income taxes of 15% or less while salaried working people paid in the vicinity 0f 30% or more.

He cites his business experience at a hedge fund as somehow making him more qualified to make the economy run more efficiently. Yet his work at buying and restructuring companies usually meant the loss of jobs in balance over his hedge fund career.  Further when judged against other  hedge fund managers like Paul Singer, Ray Dalio, James Simons, Carl Icahn, Steve Cohen or David Shaw he looks like Mickey Mouse  and we haven’t even come near the likes of Warren Buffet or George Soros. He has no record to run on as a superb business man. He was a subpar business man

Romney doesn’t talk about his four years as governor of Massachusetts except to deny that Romney care, the model for Obama’s affordable health care are the same in principle. He really has nothing to talk about as governor except the health care plan that the Massachusetts Legislature created and  enacted and he signed reluctantly.

When he was governor of Massachusetts employment was the worst of the fifty states. Business  activity was down and economically the state went bankrupt in that there  were  budget deficits. Romney has no record to run on as governor. Many of the same policies he favored for Massachusetts would now be applied to the federal government. One guesses he learned nothing from his experience as governor except.

Less government, but huge defense,

Less regulation,

Free markets,

Deficits don’t matter (Reagan proved this. [lol]),

The bigger the military the better to solve problems with force and loss of life (somebody else’s rather than  his or his family) rather than diplomacy.

Lower taxes for the wealthy so they can create jobs,

Eliminate social welfare plans like Social Security and Medicare as they are a drag on a free economy.

Tighten up voter rolls so less people can vote or are afraid to vote and those that do vote are more likely to be wealthy thus reducing the level of democracy,

Get rid of immigrants (they don’t vote anyway),

Let students fund their own education like he never did,

Military service, that’s for someone other than himself or his family but extol patriotism as if he or his five sons fought and won in Vietnam, Iran and Afghanistan.

Does this sound like the policies of BUSH II?

Share