So. The Facebook IPO was, at the most optimistic and FaceSaving estimate, a disappointment. Headlines read like notes for a PowerPoint presentation.
- Facebook Tumble Means Morgan Stanley Gets Blame For Flop
- Zuckerberg’s Fortune Down $2.1 Billion As Facebook Drops
- U.S. Stocks Waver as Facebook Declines
- Facebook’s Mobile Miscalculation
- Shares of Facebook continued to slide after tumbling 11% Monday
Look. I make no pretense of understanding stocks, or anything else to do with finance. But really: Last week, Facebook was valued at Z million dollars. That broke down to X number of shares, worth Y dollars each. So far, simple mathematics.
Then someone in a metaphorical driver’s seat — someone like, say, JPMorgan — decided there was even more to be had. So X (the number of shares) was increased, and Y (the price of each share) was increased. Hey Presto! Suddenly Facebook’s value, Z, soared pretty much the way derivatives did. Artificially, and in a rational market, criminally.
What I think is, Facebook, for all the hype, for all its enthusiastic participants (who generally, it should be noted, were not in the game except as part of the prize), FB is a toy.
It’s this season’s Frisbee, or Frogger, or Flight Simulator. It is convenient and in some ways useful, but it is not — and I fail to see how it ever will be — essential. It’s a frippery.
Maybe if Facebook were… but I could be wrong. Next month, when spirits soar along with FB stock values, all those millionaires will have the last laugh. Right now, though, some of those millionaires are used-to-be multi-millionaires.
[ADD WEDNESDAY, 5/23]
Alas, I was mistaken. I assumed bankers, et al, inflated FB value. That, according to lawsuits now being filed against aforementioned snake-oil peddlers, is not what happened. What happened in this new scenario is that they knew FB value was low — and dropping — but did not tell anyone. Anyone except for a few privileged insiders, who thus were able to prosper while the rank and file took a hosing.
A distinction without a hell of a lot of difference.