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Facebook IPO Designed To Trick Amateurs?

Looks like the Facebook stock may have been hyped for a "pump and dump" by those with insider knowledge.

Link

From the article:

"Now federal regulators, shareholder attorneys and angry investors are looking askance at the hype — and company disclosures — that attended the lead-up to last week’s ballyhooed Facebook stock sale.

They want to know whether the company and the banks that arranged the sale pulled one over on ordinary investors, against whom the odds are often stacked in initial public offerings.

“The true facts at the time of the [sale] were that Facebook was then experiencing a severe and pronounced reduction in revenue growth,” according to a lawsuit filed Wednesday against the company, its directors, Morgan Stanley and other banks affiliated with the sale"
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Comments

  • grey_gym_sock
    grey_gym_sock Posts: 4,508 Forumite
    the brokers handling the IPO are being paid to sell the shares. they're not providing financial advice to private investors, nor could they be expected to. if they've actually lied, or omitted to disclose information they should have, then by all means throw the book at them. but it may be a case of suing because ppl have lost money so somebody must be to blame.
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    No. I am an amateur but I didn't invest as I was not sure it was worth quite as much as portrayed.

    I think it is people's greed, and their disappointment that this greed was not satisfied.
  • doubleJackD
    doubleJackD Posts: 211 Forumite
    anyone else remember friendsreunited? the founders sold it to ITV for 175 million, then 4 years later ITV sold it for 25 million. i'd imagine facebook will go the same way.
  • Reaper
    Reaper Posts: 7,353 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Any investor with an ounce of common sense would have stayed well clear. The PE ratio was 88!! No stock is worth that.
  • talexuser
    talexuser Posts: 3,519 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Exactly, if you didn't realise that, you should not have been buying, so it's all your own fault you've been stung.

    The whole prospectus was based on it's a free service now, but we will introduce fees and hope everyone will pay up and carry on growing as if it was still free...
  • MoneySaverLog
    MoneySaverLog Posts: 3,232 Forumite
    edited 24 May 2012 at 6:20PM
    I really was considering shorting facebook too, just stopped short of doing so and now wished I did. They are well overpriced, even a amateur like me could see that and were bound to drop.

    As predicted earlier: http://forums.moneysavingexpert.com/showpost.php?p=50760815&postcount=16
  • Credit-Crunched
    Credit-Crunched Posts: 2,212 Forumite
    - NO 'hard assets' stock, property etc
    - Easily replicated
    - Very open to 'trend' changes as friends and myspace found out

    Any one who purchased this stock at the list price needs their heads read!
  • TDPIX
    TDPIX Posts: 263 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    IPOs are meant to hype up the stock.

    IPOs (and stock buying in general) should always be a case of DYOR.

    Unfortunately some people simply buy into hype. This is their own fault though, not the company's fault.

    It was obvious that FB was/is overpriced.
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    Probably no more 'pump and dump' than the average IPO. But the average IPO is for a company most people have never heard of.
    I guess the reason Facebook got away with it is because they are well known to billions of people, so on a percentage basis they are bound to appeal to more suckers than the average IPO?
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    edited 24 May 2012 at 9:43PM
    PS: Do IPOs usually sell shares below market value?
    The only ones I can remember that sold shares below market value are the last Tory Governments Privatisations where they sold public owned assets to the public at very low prices to buy votes?
    Apart from that I always think well the Underwriters are paid handsomely to buy shares at these prices, why should I do it for nothing?
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
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