Looks like we were right about Facebook going public just to syphon money from investors in a classic pump and dump scam. The first clue was that Morgan Stanley was the company bringing them public. My personal opinion is that it was grossly overvalued intentionally so that Facebook insiders could cash out and it looks like I am not alone!
“Maybe I am a grouch,” writes the New Yorker’s John Cassidy. “But it all sounds suspiciously like an inside job, in which the last ones in, the ordinary investors, are the saps. At the very least, this entire issue is something that the authorities — the S.E.C., but also the Nasdaq and other stock exchanges — should be looking at closely.”
This is what we said in a post March 25th:
“You may say well why is Facebook going public at the same time it’s trying to self-destruct? That’s easy….because they can collect billions of dollars from investors on the way out. They may know they have peaked, so in order to maximize profits they need to go public. Investors think Facebook is just getting started and will gladly hand over their money. Facebook can take the billions and bury them in “expenses” and sit by and watch as the empire falls. This act of apparent self-sabotage may be very well thought out and intentional.”
MarketWatch wrote the following as the Facebook IPO was unveiled:
“The list of insiders — including angel investor Peter Thiel, the venture-capital firm Accel Partners, Goldman Sachs Group Inc. and Tiger Global Management — reads like a who’s who list of savvy tech investors.”
In short, the IPO was designed to enrich a small number of insiders like Goldman Sachs by taking regular people to the cleaners.