After being somewhat agnostic about Facebook I found myself getting a really bad attitude this week. The IPO hype alone was deafening and as if things would be different this time, lessons from past internet bubbles seemed hushed by comparison.
The story of co-founder Eduardo Saverin certainly didn’t help the creeping anger. He renounced his US citizenship weeks before the IPO would make him an even richer man and increase his tax liability. Saverin currently thinks of himself as “a citizen of the world” but he became a resident of Singapore; a place, which by happy coincidence for him happens to have no capital gains tax at all.
“This had nothing to do with taxes," he told The New York Times. A statement many other fellow citizens of the world might find doubtful.
As it turned out Facebook stock wobbled and underwriting banks had to prop up the share price. On its first day of trading, ticker symbol FB barely managed the task of walking on its own legs.
Amidst all this blogger Charlie Pierce offered his thoughts on the frenzy and asked: Why is America so happy about Facebook?
Entire news networks dedicating huge blocks of time, the way they once went live for hours covering the Mercury program, to the release of a stock onto the market.
Pierce, who calls himself an Old Guy Who Loves Facebook, takes exception to celebrating the rich for simply getting richer and says that to do so marks us as once and future fools.
This was a triumph of the insiders, of the people who concocted credit-default swaps and collateralized debt obligations, and the people who will do it again, over and over, unless a more critical eye is placed upon them by the institutions of self-government.
This does nothing to ameliorate the effects of our rigged casino economy. It solves nothing connected to wealth inequality or unemployment. It is magic numbers on the screen to which only a very few people have the password, and they're not sharing it with anyone.
So here we are, years after the historic Crash of 2008 and all in the same week JP Morgan (a federally guaranteed bank) reports loses in the billions, caused by risky bets made with a trader (believe it or not) called “the London Whale” and the media goes giddy over barely profitable Facebook’s IPO.
Well rinse, wash and crash. What have we learned from the past?
Facebook controlled this process so tightly that they extracted every last dime from the IPO process. The insiders , like anyone else who bought stock Friday, actually have to see the company’s stock increase to make money.
Most IPOs in the bubble market were massively underpriced, leading to less money in the hands of the company that worked for it and more in the hands of the people who got pre-IPO stock. Zuckerman, however, had enough power here to force a relatively accurate initial price, which means Facebook gets the most possible money, and the day traders, I mean investment bankers, are bum out of luck.
Of course, they are FURIOUS! How dare a company take the lion’s share of its market value? How will bankers pay off those regulators and politicians? Think what would happen if every company did an IPO at top price? People might follow FB and tie banking fees to how well the company did, instead of how well the bank traders did! Apostasy!