Inside Financial Services

Please, No More Griping About Facebook

It wasn't a sure thing. You didn't think it was, right?

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I understand the Facebook IPO came off something less than flawlessly, but could live without the post-deal squawking, just the same. From USA Today.

Stacy Harris, 60, a newsletter editor in Nashville, . . . got her hands on Facebook shares at the offering price in search of riches but ended up with a small paper loss. Her experience left her “disappointed” in the IPO process. She got 500 shares at $38 from her broker at Smith Barney . . .

She says she, too, wanted to “make a quick profit.” Her plan was to flip 400 shares on the first day of trading, which she did at a profit, despite not getting quick confirmation of the trades due to glitches. She held the other 100 shares for the long term. She made around $800 on the shares she sold, but is down $840 on the shares she kept.

Not quite the killing she envisioned, especially given that for once she got her hands on IPO shares before they started trading, just like the big investors do. “The upsetting part is, supposedly I had the edge,” says Harris.

She thought she had an edge? Really? It’s almost enough to make you glad the company booted the quarter. Even by the standards of whiz-bang tech IPOs, Facebook is an exceptionally high-priced bundle of fluff. No one seems to be quite sure how to value the company, what its business model should be, or even if the business is viable long-term. Nor does management seem especially committed to looking out for shareholders. So, yes, things can go wrong. And yet USA Today doesn’t seem to have any trouble finding one retail investor after another who thinks they were somehow taken advantage of on the deal. Message from real world: you weren’t. Even long-term investing carries its share of material risk. (Trust me on this.) It should come as no surprise that do-it-yourself IPO flipping can be a money-loser, too. In the meantime a little less whining would seem to be in order.

What do you think? Let me know!

19 Responses to “Please, No More Griping About Facebook”

  1. VictimofMIkeSapp'slies

    Or she could have been like me and owned Tenn. Commerce. Caveat Emptor!

  2. old fashioned banker

    I would wonder how (or if) her broker at Smith Barney advised her to proceed? My advice – if you want to play in the stock market you have to be well informed about, and prepared to accept, the downside risk. Boo hoo – is what I say –

  3. southwest pilgrim

    Lesson from Stacey Harris:
    Yes, Stacey, it’s an “insider’s” market and in a blink, you were inside; however, even insiders get it wrong from time-to-time. That’s what makes a market, imperfect or unfair, as it may seem. Next time week-end in Las Vegas and suffer less. SW Pilgrim

  4. FB

    I completely understand why she is upset. Just think about all of the time and effort she spent researching the company, pouring through the offering documents, developing an earnings model and then trying to figure out what kind of multiple to put on those earnings. It’s hard work being a good investor. Oh wait … she didn’t do that? She just wanted to ‘flip’ the stock? Hmm. Why do I get the feeling she also took a cash-out mortage at the peak of the housing boom and then blamed her bank for lending the money.

  5. galdc

    The FB incident is no different than most any other event that takes place in the current world in that no one wants to take responsibility for their actions or the results. Anyone who bought FB did so at their own risk and most individuals did it with the intent to make a quick “killing”, like others did on past IPOs. When they didn’t get rich quick, they need someone else to blame so MS, the brokers, Nasdaq,et al are the culprits. And now to make matters worse, we have members of Congress getting involved. I guess they too dot screwed by not making a fast buck and are now looking for a culprit. If they want one, they can look in as mirror and see the face of people who can’t make a realistic decision so the entire market does bad.

  6. WallStreetCritic

    Frankly Tom, in a couple of years if not sooner in my humble opinion, Facebook wont be worth much if anything at all. There is more competition coming down the pike and I think this whole social networking phenomenon is going to fade. People will ge tired of telling there day to day activities on the internet and will decide they want some privacy. Besides most people have pretty boring lives so how much can you make up to keep this thing going without becomeing superfluous and irrevelevant.

  7. Ted

    The old story, a fool and his money is soon parted. However, how in the heck did they get the money in the first place: Hard work. The woman above bought emotion, not performance. FaceBook’s earning did not come near the level indicated by the $38 price. I won a drink for betting the price would be below $28.50 on June 4th’s open ($27.20).

  8. Ringleader

    I agree that this woman is like many who forgot that ownership carries risk. That said, I believe that Morgan Stanley and FB execs didn’t do a stellar job of balancing the opportunity for capital formation with setting an initial share price that wouldn’t absolutely crater! Why create a shareholder base that hates you right out of the gate?

  9. Ringleader

    I agree that this woman is like many who forgot that ownership carries risk. That said, I believe that Morgan Stanley and FB execs didn’t do a stellar job of balancing the opportunity for capital formation with setting an initial share price that wouldn’t absolutely crater! Why create a shareholder base that hates you right out of the gate?

  10. Ringleader

    I agree that this woman is like many who forgot that ownership carries risk. That said, I believe that Morgan Stanley and FB execs didn’t do a stellar job of balancing the opportunity for capital formation with setting an initial share price that wouldn’t absolutely crater! Why create a shareholder base that hates you right out of the gate?

  11. FreeTrader

    May the aggrieved egalitarians among the politicians and the ranks of the Occupy Wall Street movement please take note: Capitalism is alive and well in America. Enterprising people still come together around a business idea greater than their own individual efforts could realize. These entrepreneurs still seek and receive capital investment in pursuit of the opportunity to compete in a fair and free market. And anyone who so chooses can become an Investor simply by accepting risk of loss of personal capital previously earned (which effortlessly could be spent, buried, or burned instead), as the price of seeking reward for allocating their hard-earned capital toward a productive means to increase the value human enterprise delivers to its fellow man. This, all freely ventured, with neither guarantee nor subsidy. The Investor deserves to be respected, for he exposes himself not only to benefit but loss, no less valiantly than any other Man in the Arena. To the Occupy Wall Street Movement say I – “Occupy Thyself! Go forth and be productive on your own terms, and envy not the perils nor profits of the Capitalist.”

  12. Amazing

    The column and article read as if there is no protection for investors. The message is buyer beware and the leadership at FB should not bear any responsibility for the failings of the IPO. Increasing the asking price and the number of shares shows that they do not care, however, this should be restricted so they do not change the rules simply to benefit select individuals. If I used your comments above – does this mean the Madoff victims should simply suffer and be told the same message as well? For the record – I am not a FB investor and I am happy this is turning into a debacle. More individuals will be less inclined to invest in a pozi scheme.

  13. Amazing

    The column and article read as if there is no protection for investors. The message is buyer beware and the leadership at FB should not bear any responsibility for the failings of the IPO. Increasing the asking price and the number of shares shows that they do not care, however, this should be restricted so they do not change the rules simply to benefit select individuals. If I used your comments above – does this mean the Madoff victims should simply suffer and be told the same message as well? For the record – I am not a FB investor and I am happy this is turning into a debacle. More individuals will be less inclined to invest in a pozi scheme.

  14. jane doe

    You should talk about the way you invest peoples money . Your firm has lost money for years.

  15. Stacy Harris

    Here is my response submitted to Thomas Brown (which, to date, he has refused to print, though I will say that he and I, unlike those ill-informed “readers” who have posted personal attacks to this forum, do not hide behind pseudonyms):

    Thomas Brown,

    You appear to be in violation of your own site’s TOS (specifically, the defamation clause).

    Assuming you have the common courtesy- or is it decency? Integrity? Fairness?- to print this response to your unprovoked personal attack, it is likewise interesting that you have also violated the spirit of your log-in message indicating “We would love to hear from you regarding any error, issues and enhancement that will help you…”

    Several people were interviewed for the USA Today article. You chose to focus solely on me and my responses to questions asked of me.

    As a quick look at my online CV (stacyharris.com/author.html) will confim, to suggest I am (merely) a “newsletter” editor is both technically erroneous and, in any case, as inadequate as identifying the pope as “Catholic.”

    A statement that I was in search of “riches” was not a direct quote and that I was “disappointed” in the IPO process was only with respect to the handling of the Facebook offering. (Facebook was not my first IPO investment and some of them have turned out quite well, actually.)

    Likewise, as indicated, I fully intended to hang on to the 100 shares I have kept so, again, it is inaccurate to suggest that, as a long-term investor, I would not expect fluctuation in value. The “current” value of these share is not an issue until such time as I intend to sell, thus, again, the suggestion that I came out anything other than ahead (certainly, on the day of the Facebook IPO and, arguably, even now), since I was able to flip 400 shares AT A PROFIT (and there is no reason I won’t be able to sell the remaining shares at at least $37.01) is totally false.

    As to my belief that I had an edge, tha

  16. Stacy Harris

    Thomas Brown,
    You appear to be in violation of your own site’s TOS (specifically, the defamation clause).
    Assuming you have the common courtesy- or is it decency? Integrity? Fairness?- to print this response to your unprovoked personal attack, it is likewise interesting that you have also violated the spirit of your log-in message indicating “We would love to hear from you regarding any error, issues and enhancement that will help you…”
    Several people were interviewed for the USA TODAY article. You chose to focus solely on me and my responses to questions asked of me.
    As a quick look at my online CV (stacyharris.com/author.html) will confirm, to suggest I am (merely) a “newsletter” editor is both technically erroneous and, in any case, as inadequate as identifying the pope as “Catholic.”
    A statement that I was in search of “riches” was not a direct quote and that I was “disappointed” in the IPO process was only with respect to the handling of the Facebook offering. (Facebook was not my first IPO investment and some of them have turned out quite well, actually.)
    Likewise, as indicated, I fully intended to hang on to the 100 shares I have kept so, again, it is inaccurate to suggest that, as a long-term investor, I would not expect fluctuation in value. The “current” value of these shares is not an issue until such time as I intend to sell, thus, again, the suggestion that I came out anything other than ahead (certainly, on the day of the Facebook IPO and, arguably, even now), since I was able to flip 400 shares AT A PROFIT and there is no reason I won’t be able to sell the remaining shares at at least $37.01 is totally false.
    As to my belief that I had an edge, that belief was bolstered by MorganStanley and virtually every news outlet that reported on the IPO in advance of the offering.
    If the class action lawsuits and/or other investigations result in heads rolling, fines, rebukes, SEC changes and/or other indicatio

  17. Jane Doe

    Stacy Harris you are so right TOM BRown has no decency , integrity or fairness at all.

  18. Elieen Perreca

    Even long term investing carries it share of risk , No kidding You take money money from a person who had no business being in your fund.You have no room to criticize another another person. When someone invests in your fund you should be very clear about the down side. AS the CEO of course . I thought i had an edge by trusting MR BRown with my money .

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