Mark Cuban, the billionaire owner of the Dallas Mavericks, has a new op-ed published at Business Insider in which he declares the Facebook initial public offering (IPO) the most important IPO in history. He bases this on two different premises. One, that the huge popularity of the Facebook brand will lure retail investors back to Wall Street, meaning a large influx of new money into the market. Two, the high-frequency traders that play the market daily will destroy these new retail investors. From Cuban's editorial:
If lots of individual, retail investors do buy into Facebook and they make money at it, that could lead to individual retail investors coming back into the market. Something that individuals smartly have avoided for the last several years.
Cuban may be right that retail investors were smart to avoid the market over the course of the recession. However, will individual investors really throw caution to the wind and put their money down on a tech company? Just over a decade since the first tech-bubble burst? Probably. And those that see the market as a full time job, the high frequency/algorithmic traders, as Cuban calls them, will take those retail investors for a ride. Said Cuban:
They will feast on the unwashed, unsophisticated mass of retail buyers dashing into Facebook. They will pray that the stock skyrockets and stories of individuals making out like bandits are spread throughout the media. They will attack this stock like a pack of wolves.
Though the Facebook IPO will certainly invigorate the stock market in the short-term, it remais to be seen what long-term effects it may have. Realistically, Facebook won't singlehandedly reinvigorate the U.S. economy. What the IPO will do, for certain, is put Facebook on the same level as that other giant of internet advertising: Google. Silicon Valley, not Wall Street, will be the place to watch in the coming years.
(via Business Insider)