Facebook IPO Debacle: Somewhere Mr. Murphy Is Smiling
You know Mr. Murphy, don’t you? He’s the fellow closely associated with that infamous law typically stated as: “Anything that can go wrong, will go wrong.” If Mr. Murphy was alive today and keeping up with the contretemps surrounding the Facebook IPO (here’s a recap from The San Francisco Chronicle), I’m sure he’d be saying: “See, this proves the validity of my law.”
Right now, there’s a brisk round of the “Blame Game,” as BusinessWeek put it, being played out that looks like this:
- The bankers led by Morgan Stanley have been criticized for agreeing to expand the offering to meet a demand that didn’t quite materialize (apparently, some members of the institutional crowd were able to receive the allocations they put in for; something that rarely happens with truly hot IPOs).
- The folks over at the Naz have come under fire as ghosts took over their machinery and delayed the opening and caused various problems with orders.
- The class action lawyers have emerged and are suing everybody in sight. Now comes the news that investigators may look at the fact that the lowered guidance by Facebook, the subject of two conference calls with analysts, did find its way into the ears of preferred customers at Goldman Sachs, while it did not fall afoul of prospectus disclosure laws simply because the problem was disclosed in the filing.
- John and Jane Q. Public, who bought shares at $38, are upset and feel “gamed” by the system.
I suspect that the litany of issues will continue to grow before this is over (don’t look for that any time soon).
In the case of Facebook’s IPO, the engine of capitalism may have wheezed, choked and sputtered a bit. Sure the system is flawed. No system is perfect. However, our capital markets are still the strongest and safest in the world. You pays your money, you takes your chances… that’s what capitalism is all about and the system has produced some terrific companies along the way – Microsoft, Apple, and Google, to name but a few.
With that said, clearly the system is in need of some tweaking and trust needs to be restored between Wall Street and the aforementioned John and Jane Q. Public, who have been abandoning stocks in favor of the safety of fixed income vehicles. It is critical for the future of our nation’s economy and our standing in the world that the system be fair and works for everyone… promising companies, the banks, and, of course, investors of all kinds. I invite you, my readers, to offer your suggestions.
Have a happy and safe Memorial Day weekend. Between baseball, barbecues, bargains and beaches, do take some time out to remember those brave men and women who have given their lives for this great country of ours and do pray for the safety of those who serve today.