The Facebook Disaster – From Poor IPO to Alleged Fraud
On a day where the clouds raged with sound and water poured down on the home of Harvard University who would have imagined a site like Facebook would begin its rise. Over the past few years Facebook has grown significantly and taken the thrown as the leader of social networking. The allure of owning pieces of the company has been sought out by many for years so when the IPO was finally announced you would have guessed right if you said many people were after it. Where this craze for Facebook should have stopped is at the realm of solid, experience investors. These investors should have seen from a mile away Facebook would plummet. So on the day of May 18th 2012, why did Facebook stock bubble pop and lose its value fast? Simply put fraud, corruption, and greed are what took the shares down.
As an individual that invests in stock I was interested in Facebook. Many things went through my mind. The obvious would be to get rich which isn’t looking good so far. It’s also unlikely to be able to retire off any profits it would yield with the amount I would buy. Another would be to own a piece of history, just not the way it has turned out. As a piece of history, pass it along to my son and through the generations. Going off these thoughts and the fact the stock was pummeled I bought my shares Friday in after-hours trading for $31.34. With the potential and initial valuation of $28-$35, before being raised, it was on the lower end of their valuation. Large software companies can make money fast with little overhead. Why would Facebook with 1 Billion users be any different? Well, I know it’s still early but it hasn’t panned out yet. I’ve lost more then %10 so far and going off Stock Options the future looks bleak for any upswing.
So how could a company open at $38 a share, bubble to $45 and somehow crash and burn to below $30 in the first two weeks of trading? It has to do with false reports. Prior to going public Facebook had filled the Securities and Exchange Commission (SEC) with documents regarding their current IPO. What Facebook decided to omit was the part about their revenues falling due to Facebook being used more on tablets and phones than the traditional computer. What this meant was people viewing these documents were being lied to. What makes this shady is the fact that the big investors already inside of Facebook knew these facts. So the little guys buying on opening day had no idea. Once prices bubbled at $45 these bigger guys sold their shares. Consequently the little guys had no idea and ended up seeing shares drop profusely. These actions have led to Facebook being in the cross fire of a dangerous legal dispute. Facebook is now being sued for Securities Fraud filed by the United States District Court in New York.
The actions prior to being sued for Securities Fraud have cemented the fact that Mark Zuckerberg does not care about Facebook IPO. He never wanted it to go public and hurting the investors around him goes to show it. As of right now, Facebook stock is plummeting because no one wants to be associated with a criminal organization or a company that does not care let alone one that really isn’t making any money. I believe the upcoming weeks will be the best time to buy these shares if one is truly interested. Facebook is losing steam and prices will keep falling but you can bet your bottom dollar once this all blows over and Facebook decides to purchase or build the next big product their shares will sky rocket. So watch the markets and be ready to buy. The downside is that Facebook is driven by users, mainly the younger demography. These generations get bored quick so once the next big thing comes, Facebook will fall. That being said, Facebook is a short term investment at best.
So now I’m stuck with do I hold, buy or sell. Cut my losses by selling before it gets worse is the easiest. Out of sight out of mind. Holding would be stressful with the stock’s current direction. To buy now would be like trying to catch falling knives. You can catch knives but it will probably hurt and possibly just increase my losses’. Waiting for the stock to bottom and with a slight upswing would be smart but could be a fake sense of hope and just fall later.
Following the dreadful day when Facebook launched, it has been made out to be on autopilot through clear skies. This IPO fiasco has led to wonder were they really out of the storm or was that to just a charade?
So answer me this: Twitter @vinnypiazza
Was investing in FB smart or just gambling with my money?
Now what should I do?