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Facebook Tanks, What Really Happened

Photo of Mark Zuckerberg and his overjoyed Facebook insider friends who made Billions on an inflated bubble that rightfully tanked but at least lived up to their slogans of Move fast and break things and Done is better than perfect.

It’s pretty clear now that the Facebook IPO was a fiasco. At an outrageous opening price of $38 dollars a share ~ it was 100 times earnings “among friends.”

 

by Allen L Roland

 

Now that the over priced Facebook IPO has come and rightfully tanked, let’s take a revealing look beneath the over-hyped illusion of the social-networking website itself ~ but more importantly what its IPO fiasco tells us about a blatantly rigged stock market, where short term greed still overrides fairness, and how we all got Zuckered.

I’ve never been a big fan or advocate of Facebook although as a columnist I use it as a publishing platform among many other publishing platforms. I was asked by the producers of my monthly radio show ( Truth Talk ) to join in order to broaden their radio exposure ~ but I spend virtually no daily time on Facebook, probably know less than 10% of my so-called “friends” and have never clicked on a Facebook Ad. I’ve also spent 11 years as an Investment banker, some of it on Wall Street, and know how the Wall Street casino really works.

So anyone who is valuing Facebook by its user base is obviously counting “eye balls” that flat out do not exist.  More important…here’s some extremely insightful humor, courtesy of the Onion, that sums up the short and long term prospects of Facebook in 60 seconds… Video:

Today it closed at approximately $26.00 dollars a share ~ a loss of millions to those who bought it at the opening price and thought it was another google. Before today, the stock has lost almost 30 percent since it started trading at $38 on May 18.

But yesterday it was also revealed that Facebook founder Mark Zuckerberg knew company shares were overpriced before the May 18 initial public offering and allegedly quietly dumped around $1 billion in shares ~ according to TMZ;

“A new lawsuit claims Mark Zuckerberg pulled a billion dollar fast one on Facebook investors,” TMZ reports; “The class action lawsuit ~ filed by disgruntled Facebook shareholders ~ claims the 28-year-old CEO had inside info that the stock was grossly overvalued, and he protected his own financial hide by quickly unloading a ton of Facebook stock.”

“This is the second time in two weeks a group of FB shareholders have joined together to accuse the mogul of withholding information.”
TMZ did not cite any sources or specific financial details.

“The lawsuit claims Zuckerberg and his cronies hid the fact that there was a foundational flaw in the Facebook business model ~ that there was not nearly enough advertising revenue to support a stock valued at $38 a share,” TMZ adds.

The lawsuit claims Morgan Stanley, JPMorgan, and Goldman Sachs ~ all sounded the alarm before the IPO that Facebook was seriously overvalued, but that information was ‘selectively disclosed’ to only the largest investors.”   Read more >>>  

Here’s one guy ( David Weidner ) who wrote 10 Reasons Not To Buy Facebook Before You Buy It Anyway ~  that got it right before hand and he’s also a user ~ but not a believer ~ who admits he probably would not pay to use it.

Here’s number 7 ~ which now looks prophetic as well as the equally relevant number 10;

7) No parents. “ Facebook, it has been said, is a two-headed company. One head is Mr. Zuckerberg, who builds the products for the users. Cheryl Sandberg, the chief operating officer, is the one responsible for making the money. She’s also considered the company’s unofficial grown-up, given that she is older than 40 and has worked somewhere other than the college bookstore, even if it was Google. Together, they’ve built a nontraditional way of doing business. No meetings. Small teams. They have unconventional mottos: “Move fast, break things” is one, and “Done is better than perfect” is another. This could be a business revolution ~ or the start of a food fight in the corporate cafeteria. “

(10) The ceiling. We may already have hit it with Facebook’s valuation.

“Consider that Facebook’s 88% growth rate last year was something the company acknowledged was “unsustainable.” Or that 10% to 15% of revenue comes from Zynga ZNGA and other game companies that use the Facebook platform. Or everything in this list: skeptical advertisers, a young management team about to become amazingly rich, a history of social-network flameouts, deep-pocketed competition and the privacy issue…. It should give an investor pause, right?”    5 minute Weidner Video interview:

Right, David ~ but it’s all in a day’s work for Wall Street’s chummy club of Investment underwriters and crooked auditors who are well versed in making stock market fantasies a reality at everyone else’s expense.

Here’s the glue that holds it all together ~ “Compliant” auditors (i.e. crooks)

Here’s how it works…Francine McKenna ( author of the Auditors ) explains on Capital Account with Lauren Lyster that Facebook’s earnings or future earnings are rightfully suspect with obvious conflicts of interest;

McKenna explains how auditors (in this case, Ernst & Young) literally cook the books and that there is more than enough reason to suspect their accounting methods. She also explains how nobody had really looked under the hood of Facebook and that CEO’s often make up there own matrix to explain away losses. This would certainly apply to a non-gap matrix where management decides and manipulates reported earnings in order to make their fantasy a reality ~ which appears to most certainly be the case with Farcebook (Facebook).

Video:   ( watch first 13 minutes )

Lynn Parramore correctly writes on AlterNet what the Facebook fiasco tells us about our rigged Stock market ~ and remember I was part of that scene for over 11 years;

“Why does this happen? Well, mostly because the public is playing a rigged insider game known as the stock market. Generally it goes like this: An IPO, especially one that has been hyped more than the Second Coming, makes a load of cash for a select group of inside investors, both those giving up their shares – people like the founders and the venture capitalists — and the privileged group of banks that are underwriting the stock issue. When the ordinary investor gets to bid for shares on the stock market, the banks hope to get a big boost in the price, and sail away to their yachts with huge gains…. Facebook is scrambling to place the blame for the fumbled IPO on technical glitches at NASDAQ, but it seems that the public is not buying what they’re selling on that one. No, it looks like Zuckerberg and the underwriters were just greedy, trying to hustle as much money as possible, the public be damned.”    See article:

Matt Taibbi, Rolling Stone, definitively nails it when he writes “ I was on the phone last night with a former hedge fund CEO who was talking about this ~ “Facebook,” he said, “is a colossal example of a complete clusterfuck where everybody wins except the ordinary investor.” His point was that virtually every week now we see stories like this that hint at a kind of two-tiered market system in which most of the real action takes place inside an unregulated black-box network of connected insiders who don’t disclose their relationships or their interests, while everyone else, i.e. the regular suckers, live in the more tightly-policed world of prospectuses and quarterly reporting and so on.”    See The Facebook IPO Clusterf**k

So there you have it ~ Facebook was blatantly overpriced, the stock  tanked and what really happened is the public got Zuckered ~ and get this ~ many of those laughing faces at Farcebook’s opening  obviously knew it.

Allen L Roland

Freelance Alternative Press Online columnist and psychotherapist Allen L Roland is available for comments, interviews, speaking engagements and private consultations ( allen@allenroland.com )

Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website allenroland.com He also guest hosts a monthly national radio show TRUTHTALK on  www.conscioustalk.net

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Posted by on Jun 6 2012, With 0 Reads, Filed under Business, Economics & Markets, Economy, Editor, Investing & Finance. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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15 Comments for “Facebook Tanks, What Really Happened”

  1. I had dream sometime back, was pulled aside road in my auto and the first thing officer asked was “Show me your Face-book account card”, and then “Your linked-in account card”, card after card, etc. Having none of these cards, he said, “Sorry, we have to take you in for questioning”.

  2. Mr. Roland,
    Good article. Fits right into the picture of the greater economy I get when I look at the facts.
    I do wonder one thing, tho. I wonder when the people of this country will stop “feeling sorry” for criminal celebrities, and making excuses for them, while ignoring the C.S.’s actions. Y’know, those actions that torpedo everything honest people have ever worked for-EVER?

  3. “. . . in America, we have achieved the Orwellian prediction – enslaved, the people have been programmed to love their bondage and are left to clutch only mirage-like images of freedom, its fables and fictions. The new slaves are linked together by vast electronic chains of television that imprison not their bodies but their minds. Their desires are programmed, their tastes manipulated, their values set for them. ” Gerry Spence, From Freedom to Slavery.

  4. As a former Marine myself I got to tell you Peter, you’re one big whiner. The ideal candidate needs to show leadership abilities. I have had no choice but to read your postings for over a year now but people don’t vote whiners into office. You need to deal with issues and stop writing with a case of tissues.

    Are you really a combat veteran? I don’t think so.

    You’re interuptions breakd the flow of reading. Is that your true purpose? I don’t want a reply but I need to tell you, you are quite annoying.

  5. The yarmulked raiders appear to be killing the golden goose, as not many goyim have enough cash left to get snookered on Facebook. Goldman and Morgan are like vampires trying to bleed each other.
    Shifting the loss to American taxpayers via subsidized bailouts works.
    Here is the math- if 100 Russians had attacked each Bolshy, you never would have heard of The Gulag.

  6. Tragic, isn’t it? the hapless fools who got Zuckered by this replay of the dotcom scams. But, the whole country’s being Zuckered by their elected officials. We’re getting zero interest on our savings and a guaranteed haircut through inflation on any investments. Let’s see. The banksters at the apex of Wall St are stealing trillions–an almost inconceivable level of theft–, while American citizens are getting raped. None of this would be happening without the collusion of Congress.

    If Shadowstats has it right, real inflation runs 5% to 7% above the official CPI. Historically, during regimes of high inflation, like what we really have right now, the S&P 500 p/e should be somewhere between 6 and 9, making the market more than doubly overpriced, or so I read in the Financial Times some time ago.

    Right now, Bernanke is taking questions from a congressional joint finance committee, whose members do everything but genuflect and kiss his hand before reading questions off a piece of paper. Some black congressman was trying to get Bernanke to commit to reducing the mortgage principal on under-water loans to the point the homeowner once again has equity in the house. Wow, what a deal! In the real world of our money, that translates to minorities who bought houses they couldn’t afford having the taxpayers fork over the difference. Just as one congressman started asking Bernenke about interest rate swaps, lo and behold, CNBC takes a break. Stalin’s lackeys in the press couldn’t have gotten away with this level of media collusion. Some smarmy congresswoman is regurgitating the “people are hurting” crap, undoubtedly leading to some call for more money printing in which the people who put her in office behind closed doors get to use it while those “hurting people” can go to hell. Congress is not even corrupt, as they say, since it works perfectly well for the criminal banking cabal who own it lock, stock, and barrel.

    • Well said, Dan ~ it always comes back to the words of the late George Carlin who knew the reality of who we were owned by ~
      http://www.youtube.com/watch?v=acLW1vFO-2Q

    • Those “minorities” wouldn’t have bought “houses they couldn’t afford” if the speculating class (who contribute NOTHING) hadn’t driven housing prices through the “roof” in the first place.

      • Dave, you said it yourself, minorities bought houses they couldn’t afford, which was a function of government greed and Wall St/GSE hand-in-glove mortgage securitization. Local and regional bankers who previously relied on the Three C’s of lending were forced to throw sound judgment to the wind by political forces. Because these Main St banks could sell their loans to the GSEs and Wall St crooks like Goldman Sachs, we got NINJA loans, or no income/no job and no asset loans, and otherwise welfare payments were allowed as a source of income. If these loans were not made by Main St banks, the regulators would be all over them like a ton of bricks and force them to make these bad loans. That’s the legacy of gov meddling and its reliance on Wall St to engage in social engineering on such a grand scale. The result in decades past gave us Apocalypse Detroit, and the result this time around will be worse.

        But, there’s another factor I doubt you’re aware of. In minority neighborhoods the housing stock was largely already delapidated before the buying bubble took off. The banksters on Wall St may not be the greediest pigs of all, as it turns out, with that dubious distinction going to Realtors, who sold dilapidated houses to people with no experience in home ownership who never grew up seeing their parents maintaining the family house. They moved in and thought houses sort of took care of themselves like an apartment building. Not their fault.

        To make matters worse, although Realtors recommend an inspection, the home inspection business is largely a rubber-stamping of a Realtors’ deals, but one cleverly disguised under cover of an extensive report of trivial observations running to 30 pages of boilerplate with photos. Only those defects guaranteed to result in a law suit in the immediate future against the Realtor or inspection company are called out for obvious reasons.

        Several decades ago big real estate houses were hit, not surprisingly, with large judgments for negligence and constructive fraud for misrepresenting the condition of the houses they sold. A clever bunch of con artists with building experience got together and formed a trade assoc with code-like sounding standards of practice which essentially exonerated the inspector from the responsibility of doing a code inspection on the grounds that much cannot be seen in a completed structure. This is self evident, and is to a court as well, but enabled these glorified handymen, state-licensed or not, to do a handyman walk-through that took the Realtor off the hook for negligence or constructive fraud regarding condition. Most inspection reports, in turn, are one long disclaimer of responsibility. The long and short of it is that minorities buying houses in the cities got screwed into buying houses they couldn’t afford, which is one thing, but also bought houses that a team of experts couldn’t maintain with an unlimited budget. The most important evaluation of a house begins with design criteria, solar orientation, and such, all of which are glibly brushed aside by fast talking Realtors and by inspectors claiming it’s not their province.

        • Remains me of spider, the spider will build a web and then attempts to lure its prey. Feeding off victims, the problem is identifying the spider(s), and what their using in their web to lure in victims? Seen any spiders lately Dan and DaveE?

        • Awaiting Moderation….how language has become so complex; you should avoid saying or writing anything. No more here, tire of being stalked. Just remember that countries having extreme phobia eventually and slowly destroy themselves.

  7. It never ceases to amaze me the things “humanity” will go through to avoid making a useful contribution to the planet and our “civilization”, something once known as “work.”

    Another chapter in The Book of Parasites. (Parasites was, of course, the Greek philosopher who first wrote what is now called “game theory” on cheating one’s opponents without getting caught.)

  8. Facebook is another Wall Street con game that would make P. T. Barnum (America’s patron saint of capitalism), beam with pride.

    • Albeit a good expose on the stock market scam an even more interesting story would be where the ‘private data’ that was constantly being pilfered was going … and who was the shadow in the server room behind the server room?

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