SEC Calls For Review of Facebook IPO

beaverdownunder writes "After losing another 8.9% of its IPO value in its third day of trading, SEC Chairman Mary Schapiro has called for a review of the circumstances surrounding Facebook's IPO on the NASDAQ late last week. Unable to sell Facebook short, investors have instead taken to short-selling funds that owned pre-IPO shares as revelations come out that the underwriters involved revised their Facebook profit forecasts downward in the days before the offering without similarly revising the opening share price. Meanwhile, Thomson Reuters Starmine has come out with a post-party Facebook estimate of a meager 10.8 per cent annual growth rate, valuing the stock at a paltry $US9.59 a share, a 72 per cent discount on its IPO price, signaling that the battered stock may not have found the bottom yet."

Comments

Re:The value of investments can go down as well as

[m.dillon]

Generally speaking (and ignoring FB which I've already commented on)... but generally speaking this is NOT true. The small guy actually has the advantage in this market, which makes it ironic that the small guys have mostly abandoned it.

The big guys have been fighting amongst themselves since the crash and it has created lots of opportunities for smaller retail investors to find really excellent entry points. Simply put, the reduced liquidity in the market gives the advantage over to the smaller players whos trades don't move stocks while the bigger ones get stuck fighting each other.

It used to be that 'dumb money'... a euphemism for the 'retail investor', gave the markets enough liquidity to allow the bigger players to enter and exit positions without excessively moving stock prices. These days with the big boys playing against each other and reduced liquidity it's more a matter of one big boy outwitting another because their trades move the underlying stocks too much. The small guys can take advantage of the much more obviously oversold conditions to buy, and overbought conditions to sell. The big guys can't.

The problem that a lot of retail investors have is that they don't actually know how to invest... they think they are investing when they are actually just day-trading. They pile into dangerous spaces that have already built up momentum to the upside instead of buying when they were low. For example, smaller players are STILL piling into the muni/govt bond markets even as we speak despite the huge risks involved as the Fed QE2 ends. Most retail investors sell during the inevitable pullbacks in these spaces (instead of selling during the rise), or buy well after a security has risen (instead of when it was closer to the bottom and still falling). They believe the crap that is fed to them by the media, believe the hype, believe the stories written by 13 year olds or guys with fancy titles and obvious conflicts of interest, and don't bother reading the financials of the companies they invest in or even listen in on the conference calls.

It doesn't take all that much work to actually invest properly, it just takes a bit of patience and a minimum of a medium term view (instead of a short-term reactionary view). The best investors in this market aren't the idiots who day-trade, it's the people who might do one or two small trades a week, maximum, slowly working long-term positions and collecting dividends while the big boys rattle the market back and force and provide the great entry and exit points.

The deck just isn't stacked against us, people only believe it is.

-Matt

Re:WWWBD?

[TapeCutter]

This is the culture in Scandanavian countries, who have been at the top end of the standard of living charts for a very long time now. It's also a common* attitude here in Australia and we rank high in those charts, (*common but not the prevalent one, which is closer to UK culture ). It was also a common attitude in the US until the 1970's when, as the song goes - "We all got stoned and driffted away".

At 50+ I've seen the political pendulum swing a few times but it's slow on the scale of a human life time, the spring driving it even unwound a bit with the civil rights movement, the disintergration of the USSR and "Gang of four" in China. Yet internet forums across the planet are chock full of angry young men who would tear all that down and start again because they don't like (say) the current IP laws. I may be wrong but I think I can understand where they are coming from because I was an angry young man once,whereas they have yet to fully experience actually "seeing it all before".

Having already made myself unpopular with at least half of slashdot I'm going to alienate the rest of you by saying that this attitude was also displayed by both Bush and Obama when the GFC exploded in their faces. They set aside their ideologies to take unpopular and decisive joint action that in my opinion avoided a global panic run on bank deposits and the subsequent great depression senario that would follow. For a trully serious problem they put society first and I think history will eventually thank them for it.

To head off any angry young men posting BraveHeart style freedom rants on my lawn. - You are alreay free from everything except consequences. Nature (AKA -The great JooJoo in the sky) intended it to be this way. Just like Ayn Rand, she does not care about your existance any more than a road train cares about the bunny hypnotized in it's headlights