Rogering Alligators

You can’t feel sorry for those who bought Facebook shares at $38 and now can’t sell them for $28.

There were warnings and warnings and warnings that this IPO was an overpriced scam.

Even Goldman Sachs, the erstwhile arch-hyper of Facebook, announced before the IPO that it would be selling its stake in the offering.


So what kind of idiot still goes ahead and buys at the offer price?


Of course there’s all this stuff about the Facebook guidance changing during the road-show and only being divulged to a select few.


This is useful ground for a lawsuit for the $38 suckers to recoup some of their money, but it doesn’t explain the glaringly obvious truth that the Facebook site was never in a month of Sundays ever going to be worth $100 billion.


The smarter money knew that and shorted the stock from the moment of the IPO.


Of course no one admits they bought Facebook at $38, but it would be lovely to hear from someone who did what were his reasons.


Is he nuts? Or so bored that he needed a rush from doing something similarly stupid like bungee jumping, rogering an alligator or downing a brace of Long Island Iced Teas?



  1. I see the UBS explanation is quite amusing, Mike, that they didn’t get confirmations when they put in their orders to Nasdaq so they kept on repeating the orders and then found they’d been allocated shares for every one of the multiple repeat orders. Maybe Facebook nobbled Nasdaq. I could believe these financial types capable of any skullduggery. And they’ve corrupted the industrial world as well e.g. STM.

  2. Well banks don’t usually pay their traders huge bonuses for losing money – but maybe UBS have learnt from STM 🙂

  3. That is extraordinary, Mike, quite extraordinary. Even a financial naif like me could see that the Facebook IPO was a Goldman Sachs scam. The only explanation I can think of for sophisticated investors buying Facebook is that they were, in some way, bribed to do so.

  4. Swiss bank UBS lost 349m Swiss francs ($356m) by investing in Facebook shares, more than halving its profits

  5. Anyway, it creats passion in the recession era. don’t judge everything by money, evolution comes from many aspects.

  6. One of the daft things about Faceache is you canNOT delete an account so by now what with lost passwords,boredom,anger,relationship failures etc etc 1/2 the users they claim don’t even exist !!
    It was never going to be worth much – what suckers would pay so OTT… oh maybe the few users left.

  7. Thank goodness they missed that trick, Mike, I assume then that my pension fund remains unaffected by the Great Disappearing Value Act – I see their shares are down to $25 today

  8. Yes G-S missed a trick there. If they’d done a joint listing on LSE then a lot of pension funds would have been obliged to purchase some of the shares for all of their tracker funds.

  9. Yes Lefty, it seemedsoextremely odd to me that there are enough suckers to stump up $16 billion on the assumption that Facebook is worth $100 billion, that I began to suspect that the Wall Street boys had twisted multiple arms in the pension trusts and investment trusts etc to buy a quota. I hope my pension fund manager wasn’t one of them. The Facebook share register could be an interesting read

  10. Yes [Anonymous]it is wonderfully ironic that a site supposedly dedicated to forming communities based on friendship can have royally screwed its membership

  11. Wonder how many of the new shareholders de-friended Zuckerberg when they realised they had been screwed?

  12. Perhaps the IPO is an indication of how few people are left in the stock-market?
    It’s mostly machines doing High-Frequency-Theft – therea are no sheeple left anywmore.
    Mind you, indirectly a lot of folks have been indirectly duped as their pension fund “manager” maybe ploughed funds into it.

  13. Wasn’t this just a simple case of the suckers thinking they’d get on to “Google II” sooner rather than too late, like the first time? Hell, we even had a refresh of the Facebook Phone rumor in the past week.

  14. Robert’s comments are interesting. I have a different opinion in some respects though.
    Value isn’t about the creation of change. The mistake as you hint at in your earlier earlier comment, David, is to conflate value and price.
    I prefer to avoid the term “value” because people mean different things by it.
    When extraction of net financial gain is involved then I think “income” serves, when creation of good (whether that be goods, services or infrastructure) is involved I prefer “utility”.
    The creation of income can be achieved by sticking a diode into the price of derivatives as Robert rightly states. My own opinion is that this kind of activity is very near to, if not exactly, a zero sum game. Some will win, but these will be balanced by the numbers of losers. This is tied to the same mechanisms that Galbraith was referring to when he called the Wall St crash the biggest arbitrage in financial history, or something like that.
    The creation of utility is not a derivative quality however, and isn’t a zero sum game. The creation of utility and its subsequent conversion to income is a means of creating income without the necessity of their being as many losers as there are winners.
    Two steps are needed to achieve this second activity though – create the utility and convert to income. Intel created the utility but were unable to convert. What the iPhone did was achieve conversion. There are a million post hoc rationalisations of that, so I wont exercise them here.
    I think there is some kind of “Innovation discussion” equivalent of Godwin’s Law which means that any discussion of how to turn invention into profit is over when someone mentions the iPhone.
    But that is just my naive view.

  15. I assume you’re referring to Robert’s explanation, cheese, and I couldn’t agree more – it’s quite masterful.

  16. Hats off for this explanation !

  17. Thank you very much indeed, Robert, fascinating. I had never thought of it like that but now that I do, I see it explains a lot. Much obliged.

  18. I think you misunderstand me.
    Value is about the creation of change, since change is by definition a derivative, it follows that value is by definition a derivative.
    Consider the change that iPhone caused in the cell phone business. The concept was not entirely new, I had heard similar concept devices presented since before 2000, indeed Intel, when it was involved in cell-phones (for the first time), tried to sell a similar concept but was laughed out of business. They were unable to bring about the change in behavior to enable an iPhone to be born. Steve Jobs was able to somehow create this change.
    With Facebook you have a similar story of a company selling an old concept, but somehow packaging the message in such a way that it became an essential part of many peoples lives. This proven ability to instigate massive change is an invaluable property that Facebook is selling.
    Bankers can and will argue and assign a price to the discounted value of future cashflows or Net Present Value, whatever measure you want, But what they can’t price is this ability to initiate change and insert your product into this changed space.
    Consider Intel today, would you trust them to define a vision of the future? If so why? they have not created a successful new business in over 15 or maybe 20 years. Yet when the PC was born they created massive change. They presented a little box that individuals could control, the concept resonated with many that were sick of the IBM business model. The rest is history. The value of this change was almost priceless, so pricing this ability to create change, as some form of discounted cashflow is silly. So modern high tech investing theory would suggest that the rate of change equals value. Consider this as the rate of adoption for something like Facebook.

  19. So price is everything Robert and value is nothing – a bit cynical.

  20. David with all due respect you’re searching for fundamental value where only derivative value exists. long term Investing, in this day and age, is about managing the derivative. If Joe Public is
    still reading Ben Graham on investing than is it Wall st that needs to wake up or John Q Public?
    What was it that the great John Maynard Keynes had to say about the long term economics…Something like “in the long term were all dead”

  21. IMHO it just shows the awesome power of Wall St to manipulate markets, Robert, and how silly the rest of us are to have anything to do with these rigged markets.

  22. It’s been a bit over a decade since
    Facebook IPO’d at a price/earnings ratio of about 90. Who’d rush to open a savings account offering 1% interest? Stocks with a P/E over about 15 are only worth buying if there is expectation of massive growth in the business.
    And why would that happen? FB must be close to being as popular as it ever can be, most of the people who have an inclination to use it are already doing so. Its earnings growth is slowing down.
    Thus the IPO was a pure pump-and-dump speculative bubble and as you rightly say, people who put their money into such things deserve no sympathy.

  23. It always amazes me that plenty otherwise rational people when it comes to money cant make a distinction between greed and investment.
    But when probed, I certainly would prefer the long island ice teas and some good company over the thrilfull ride of FB.

  24. A very famous British economist once said
    “the markets can remain irrational longer than you can remain solvent”
    this remains as true today as it was in his day and as is implied, by this statement, stocks can be easily over-priced and still have upward momentum, OR under priced and have downward momentum. Actually the direction of momentum has little to do with stock fundamentals and a lot to do with the balance of trade.
    I remember that you were critical of GS when they took a stake in Facebook at term-sheets implying a $50B valuation, yet here we are today with $100B IPO where GS’s existing position enabled them to sell into the IPO, Turns out this was a very smart investment for GS.
    Logically FB is probably worth less than $10B, but it is not logical that FB has grown even a $10B business from such a simple idea, why didn’t MySpace succeed, why didn’t QQ from China dominate this market. Yet here we are FB is the default social network portal…
    I’ve long ago given up trying to understand market valuation mechanisms for popular stocks, it far more profitable to just understand the momentum direction and trade accordingly.

  25. A smart person could believe it was a $10 stock long term but that there are enough dumb investors who would let him ride it up to $50. Also known as the greater fool theory.

Leave a Reply

Your email address will not be published. Required fields are marked *