General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsForbes: Facebook Fed The 'Ignorant' Masses An IPO Lite
Facebook Fed The 'Ignorant' Masses An IPO Lite
The Facebook IPO is an excellent reminder of the role that amnesia plays in the stock market.
Its said that markets are efficient, and I guess they are in a narrow sense, in that stocks tend to incorporate all of the publicly available information about them. But the same principle certainly doesnt apply to the way market participants interact with one another. So we have the spectacle of JPMorgan Chase repeating the mistakes of 2008 and losing $3 billion (and counting). For the rest of us, we have the Facebook IPO, in which an entire body of knowledge and memory of the IPO process was buried down the memory hole, totally forgotten.
How did a company best known for wasting peoples time (when its not violating their privacy) become the IPO stinker of our times? Because people forget that its been proven time and again that the only proven winners in IPOs are the issuers, insiders and underwriters, with favored clients like hedge funds and institutional investors the only ones able to benefit consistently from IPOs that perform well out of the starting gate.
In this case, the issuer made out like a bandit. Facebook reaped $16 billion that will allow it to compete with the Goliaths of the industry. Facebook management, meanwhile, has borrowed from the techniques of shoddy used-car salesmen everywhere by failing to give full value for all that money. .................(more)
The complete piece is at: http://www.forbes.com/sites/thestreet/2012/05/30/facebook-fed-the-ignorant-masses-an-ipo-lite/
Turbineguy
(37,337 posts)A company is worth what people are willing to pay for one share multiplied by the number of shares available. In the end, the insiders cleaned up.
1StrongBlackMan
(31,849 posts)How soon, after the launch, can "investors" short the stock?
It would seem that any/all of those preferred investors that got the tips about the company's under-performing, would not buy into the IPO; but rather, short the stock as soon as possible.
But then, again, if they did ... wouldn't that open them up to insider-trading violations?
KurtNYC
(14,549 posts)and seeks damages for their allegedly lying on the IPO disclosures. The law firm handling the suit won millions in a similar suit against Enron.
Insider trading is almost never used because there are easy ways around it and congress is exempt so it is a joke basically.
Generally, when you sell a stock short you have to borrow the shares from an entity which owns them. Meaning in this case that the shares would have to be purchased at the IPO price before they are available to be sold short. You then have up to 3 days to buy the stock and replace the borrowed shares. So I think the answer to your question is that an IPO can be sold short on the 2nd day but not on the opening day.
You can often spot a stock which is being shorted heavily because it will slide down all through the trading session and then in the last 10 minutes shoot up a little as investors buy to cover their short.
Response to KurtNYC (Reply #3)
1StrongBlackMan This message was self-deleted by its author.
just1voice
(1,362 posts)just before the IPO:
http://www.forbes.com/sites/frederickallen/2012/05/17/you-should-definitely-buy-facebook-heres-why/
http://www.forbes.com/sites/chrisbarth/2012/05/17/your-name-here-top-analyst-explains-why-facebook-isnt-going-to-fade-like-myspace/
http://www.forbes.com/sites/randalllane/2012/05/17/statistical-proof-the-facebook-ipo-will-be-as-euphoric-as-predicted/