Sometimes something is just a bad investment, and as time goes on, the shares you purchased in the company just lose more and more value. At other times, as with the Facebook IPO, it is clear that you were swindled.
When a big bank like Morgan Stanley suppresses a valuable forecast which they know would certainly stall trading if introduced on the eve of the IPO, then selectively informs other big banks and investors, then it is what's know as a "screw job", a term made popular by one of my college investments instructors. "Screw job", refers to one getting f*%#ed over by someone offering a junk investment.
Imagine yourself as a Facebook investor, or maybe you are, this thing has to have you pretty upset. Now, that's is not to say that the stock is worthless. Many experts still believe Facebook shares will perform over time. The larger point here for individual investors is that every time big banks promote a stock as, "the next big thing", it turns out to be a gimmick to generate some revenue off the general public's uninformed position in the trading game.
Many people are fed up and experts are warning that this will be the last straw for many small investors. Wall Street, in their minds, represents a losing game. A game rigged for big banks and large investment firms to make money, while smaller investors and outsiders are left holding the bag. The bag of, you know what.
Andrew Stoltmann, a Chicago attorney who represents retail investors comments on the sentiments of his clients:
"This is clearly the latest in a long string of events that is eviscerating the confidence investors have in the market,"
"The perception is Wall Street jiggered this IPO so the underwriters made money, Facebook executives made money and the small investor got left holding the bag."
Steve Sosnick, an equity risk manager for Timber Hill LLC, also comments on the frustration of retail investors:
"If you have a lot of angry people out there, they're going to express their anger in different ways,"
"One of them may be with their feet."
We also learned that the Securities and Exchange Commission (SEC) is closely examining what they refer to as "issues" with the IPO. Mary Schapiro, chairman of the SEC commented to the press at a recent Senate Banking Committee hearing.
“I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook,”
To add to the fun, federal regulators are looking into the Nasdaq computer glitch and going through last Friday's Facebook trades with a fine-toothed comb searching for any evidence of non-sense on Nasdaq's end. Combine this with Facebook's less than stellar trading prices on the stock market this week, and you can see why some people are calling this the worst IPO of the decade.
According to some, $14 is a better price for shares offered in the Facebook IPO, but right now trades are still plugging along at almost $32, so I would say they're still doing okay despite all the controversy. We'll keep you posted as the Facebook IPO and big bank scandal continues to unfold.