(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.
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ahh--I remember you saying when FB was in the 30's and options were listed it would be a great idea to buy puts.
ReplyDeleteIf you read Jim Willie at the Golden Jackass, Morgan Stanley is toast anyway in a few months. He expects MS to steal the assets from hundreds of thousands of its customer brokerage accounts as it goes under.
ReplyDeleteDave - I have a colleague whose wife has work at FB since its early days. While on paper the value of her options were worth a nice chunk of change on IPO day, they're obviously worth much less now. They are literally counting the days until they can unload and get out whatever they can.
ReplyDeleteI wouldn't even blink about selling it at $10.
DeleteAnother comment about MS. I passed along Jim Willie's MS comments to family members who have MS accounts dating back to the Dean Witter days. The response was something like that would never happen, they're fine. I responded, just like Bear, Lehman, Merril, MF, PFG, etc... were all fine until they weren't. They've been warned but normalcy bias is very hard to overcome.
ReplyDeleteTrying to explain custodial risk to people is hard to do. Now imagine trying to explain to the same people that their IRA/401-k's are in jeopardy.
DeleteIt speaks to the entitlement felt by the hoi polloi in this country. "This could never happen here or to me." It's very dangerous and will be exploited big-time when the time comes by the people looting our system.
Dave, you say the word "whore" like it's a bad thing. In comparing Romney and Obama to whores, you do a disservice to all of the ladies out there who "work hard for the money", and who would would be nonplussed at being compared to those two jizzwads (besides, aren't we all whores in some way? Don't we all contort ourselves in some fashion just to keep the bucks coming in?). Tsk, tsk, Dave. Please do be careful about how you toss around the word "whore" in the future.
ReplyDeleteGood point Marcus. It is indeed an insult to the Heidi Fleiss' of the world to compare them to the Obamas and Romneys.
DeleteDave are you giving up on the junior mining stocks?
ReplyDeleteAre you serious? Now is the time to add to positions. In fact I added personally to my positions and have been adding to fund positions for the last month, including today.
DeleteWATCH 'INSIDE JOB' ON SHOWTIME.... THERE SORRY AND WONT DO IT AGAIN...... IS IT RAINING OR IS SOMBODY STILL P..SIN ON MY HEAD, BECAUSE I DON'T HAVE A ROOF TO HEAR IT ANYMORE.....EMJ..
ReplyDeleteNice article, as always. However, Dave, I'd argue there is a faster way to see 40 billion vanish:
ReplyDeletehttp://www.usdebtclock.org/
The US government's currnetly burning thru ~60 billion USD per month (i.e. official debt). The big reset's well on its way.
LOL. Ya I know and thought about distinguishing between private and Government but I got lazy.
DeleteHey Dave, How are you?
ReplyDeletehttp://www.corriere.it/economia/12_settembre_06/Bancomat-obbligatorio-decreto-crescita_09a2da50-f7f8-11e1-a29d-c7eff3c66a96.shtml
50,00 Euro, or may be kess in the future.
Il Folletto
Buongiorno Il Folletto. Sto bene! Grazie. Com'e stai? Tutto bene?
DeleteGrazie per l'articolo.
Spero che tutto va bene!
Ciao
No I think there was a better way to lose money. Its the Gold Miners. XAU/Ratio is still at 0.10 at the movement (and not getting any good traction), although up lately, is heavy going and as if they have concrete boots on.
ReplyDeleteSo I would beam about Facebook and have Schadenfreude since the Major Gold Miners aren't any better and still act very sluggish.
People will only be convinced this time around if they can uncouple from the rest of the market.
Jim Willie: No Central Bank Solutions: Liquidity vs Insolvency
ReplyDeleteThe Hippocratic Oath dictates never to do harm to the patient. The central bankers instead take the Hypocritical Oath that dictates to cripple the patient, to drain the blood, to preserve power by tightening the straps, to erode buying power from hard work, and to render life savings a weak shell, while whispering lies in the ears on blame for what went badly wrong, against the background din of endorsed war themes. The effectiveness of the latter oath is seen in the systemic failure of the USEconomy, whose financial and economic structure has been destroyed by bad economic policy, the poor paper financial foundation from the monetary system, corrupt bond market practices marred by $trillion frauds, and a marriage between the state and sanctioned large corporations whose only efficiency is seen in dark corners protected by criminal impunity. The Fascist Business Model showed itself in bold terms in the 1990 decade, in the strengthened links between state and major corporations, where inefficiency, favoritism, and corruption produce the bitter fruit of a sclerotic financial structure and weakened body economic. The Gold price responds to the systemic failure of the ruinous financial and economic policy, aggravated by the devoted ghoulish doctors and their perverse solutions that neither fix anything nor attempt to apply remedy.
http://www.silverdoctors.com/jim-willie-no-central-bank-solutions-liquidity-vs-insolvency/