The Blog Of The Securities Industry Professional Association


Market cap losses now exceed over 50 billion

 A little less then two months ago we wrote a story known as “ FACEBOOK FOLLIES” and openly criticized the impending public offering and wondered why this huge scam was being allowed to be perpetuated on the American public.  Here we are two months later and the facebook debacle continues to bleed investors dry.  We predicted that the losses from this offering would be greater then the Madoff mess but even we thought it would take a year or so not two months.  In less then two months over 50 billion in market value has been lost and anyone who invested in this dog at the IPO or shortly there after is in a world of hurt.  What’s even more troubling is that fact that simple guys like me were able to review the offering material and in ten minutes ascertain this was a sham.  In our story in May we not only pointed out the inflated offering price but also the foggy numbers that FB had been claiming, including the number of users.  Yesterday in a release FB acknowledged that hundreds of millions of its so called users are duplicates, spam and ghost accounts.  In addition, the wonder boy Zuckerberg who had claimed the company was profitable for years had to report its first ever loss in its initial news release on earnings. Very convenient how that works isn’t it?  You claim billions in profits and revenues for three or four years and then once you get the public to bite on your offering you suddenly release that you are losing money.  In a sense isn’t that pretty much what Bernie Madoff was doing?  I know there will be those  out there screaming that you cannot compare the two because Bernie stole the money but to me lying is lying and telling me that they only have a loss if they sell is like getting somebody to wire you $150,000 for a Ferrari and you deliver them a Volkswagen.

If the same exact thing occurred with a smaller company and a smaller brokerage firm, heads would be rolling and every broker involved would be under subpoena to testify about this fraud.  However this was conducted by JP Morgan, Morgan Stanley, Goldman Sachs and the rest of the seven sisters on Wall Street so instead of an investigation we have bobble heads making excuses.   We wrote back in May that it was reckless and irresponsible to market and value FB at over 100 billion when Ford Motors was only valued at 38 billion and commented that allowing them to be valued at 4 times the value of one of the oldest, most recognizable and diverse companies was a joke.  Ironically today FB has a market value of approximately 38 billion which was the exact value of Ford when we wrote this.  This whole debacle will make raising capital for new companies even more difficult then it already is.  There are thousands of companies out there that need money to grow and hire new employees and help build back this economy but I fear that this FB fraud will be yet another nail in the coffin of this economy.  I will leave you with this sobering thought:  If some regular Joe like me can read a rip-off and correctly predict it before it happens, how many more frauds are being planned and implemented right now with the Governments consent?

Very scary to ponder.


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August 3rd, 2012


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