Wednesday, September 5, 2012
(Click on chart to enlarge)
It took a little less than 4 months for Wall Street and the insiders at Facebook make $40 billion disappear. It took more than 40 years for Bernie Madoff to accomplish the same feat. Maybe it says something about the devaluation of the U.S. dollar, since Madoff got started before the gold standard was removed. This waste in wealth might even make the Government blush.
This whole situation is just unbelievable. I've never seen a large-cap, high profile IPO result in this degree of failure this quickly after it was issued. Never. This is truly a modern day Dutch tulip bulb event seeded in what is likely a high degree of illegality on the part of Morgan Stanley to get this deal done. Does everyone realize how many individual retail investors got plugged on this one by their broker/financial adviser? I just can't believe that Morgan Stanley is not investigated by the SEC and the Justice Department over the distribution of the FB IPO.
I know for a fact that Morgan Stanley violated all kinds of rules and regulations put in place by the SEC Act of 1933 and subsequent Investment Advisory and retail brokerage regulations put in place. There's no way they did not. Let me listen to the recordings of the brokers and institutional salesmen during the IPO distribution period. Every one of those phone lines is recorded. I know this because because I've spent many years in the industry. And I can guarantee you that the Obama Administration is looking the other way.
Facebook made some announcements via an SEC filing yesterday which included the provision that the Company will be withholding and "retiring" a certain percentage of shares set aside as insider compensation and will be using the "proceeds" to pay the tax bill on employee stock sales. The interminable Wall Street apologist, Henry Blodget - who by the way settled with the SEC for several million over his role in pumping Amazon.com during the internet bubble and really should have seen jail time - called this action a "stock buyback at $19 per share." That's laughable if it wasn't such an ignorant comment coming from someone who is supposedly educated. It's not a stock buyback. It's called "required tax withholding on compensation."
Blodget believes this is a signal that management thinks the stock is cheap. This isn't a stock "buyback." A stock buyback occurs when a company goes into the marketplace and buys back shares, usually over time. This is retiring shares that haven't hit the market in order to avoid a massive IRS problem. Without spending the time to look into all the details, I highly suspect that Facebook was required to do this. Buyback - give me a break Henry. Facebook will retiring 101 million shares at $19 share, leaving employees with another 133 million shares that will be distributed and dumped on the market on October 26th. If you look at the withholding ratio there, it looks suspiciously like a W2 withholding. Fuck you Henry. If Facebook wanted to do shareholders a favor, they would wait another 3 months and retire the shares at an even lower price level on the stock - like $10-12, where it's headed soon.
The fraud and corruption on Wall Street - and complicity of the Government - gets worse by the day. It will continue to get worse no matter who gets elected in November. Romney is a total Wall Street whore. Obama became one. The only way to protect your wealth from this is to buy physical gold and silver, which will be going much higher over the next several months.
Posted by Dave in Denver at 12:25 PM