Regulation Fair Disclosure, Reason #781 to Increase Taxes on the Rich....

Genius Gone Insane

Genius Gone Insane

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Aug 19, 2003
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...before they get decapitated by angry Americans.

I figured illegal word of mouth activity happened at every IPO, but until today I had no idea it was actually legal!

"But working in Facebook's favor - and potentially against regulators - are various exemptions for private companies under other sets of rules, particularly one known as Regulation Fair Disclosure. The rule, adopted in 2000, restricts companies from providing information to certain investors or analysts without informing the wider public. But it provides broad exceptions for companies that aren't yet public, including a sizable loophole covering "oral communication made in connection with the registered securities offering." Facebook and its underwriters may have shared their updated analysis with one another orally.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/23/MN3K1OMFH0.DTL&ao=2#ixzz1voog8bu9"

If we are going to let these people cheat legally, can we at least please start taxing these fuckers?

Blood boiling. I can't believe my retarded ass just found this out.
 
I don't know much either. But apparently, according to the article, the Regulation Fair Disclosure rule (created in 2000) permits oral communication prior to an IPO. (IPO = Initial Public Offering = first day that people can purchase this new company's stock)

And yes, that's correct, you are not misreading it. Yes, insider info is legal in this case. Tell me that is not the most fucked up shit you ever heard?

So basically if an IPO is about to tank, the owner can tell all his buddies to bet against it, and come out with a fortune. Which is exactly what happened with Facebook a few days ago. That's why they are getting sued.
 
It's introduced a new term into trading - to get Zucked is to have your net worth drop substantially in an instant.


This IPO is just indicative that we're in another tech bubble, and it's about to burst.
 
I don't get stocks so much either but read a lot these days about this.

A specialist explained it in those terms : if you have a house (number of actions + their values, decided by fB after agreing with the banks who trade them to the market), sell it for 1M and in the next 3 days it's worth 2M, then you have made a bad deal because you could have sold it twice more and make a bigger benefit. But if 3 days later its value is 500 000 when the new owner sold it to a 3rd person, then you can consider you did a very good one because it was actually not worth 1M.
So for the average stock buyers/owners, it's a very bad introduction (so far) but for those who had interest in the pre-IPO process of producing/selling actions to the banks (i.e. the ivory tower of fB, their investor friends etc), it's a very good (too good, hence why the legal action not to mention all the conflicts of interest that they are gonna discover there) introduction because it means they sold more actions than it was worth it, in a short term at least. So fB generated too much money during this pre-IPO process, therefore being unstable right from the beginning.

Well it's kinda confusing for me as well, but put simpler : fB won, because it created for itself a value it's not worth it. Even if they are facing trouble, the action drops and they lose value, they still have sold to the banks which trade those stocks in the market, something like 4 to 500M stocks at 38 dollar a stock. If you consider its turnover is a few billion max a year, you easily get that it's not worth that much ! So a good introduction for the company is not necessarily a good introduction for the investors (in a short term because in the long term I guess it's better for a company to have stocks that perform well). Its more or less normal and it's the normal process but this time it was way too exaggerated.

Another more obvious (even for me tbh) example of jackpot is the example of Microsoft which owns 1.8% of fB. Microsoft bought that 240M some time ago, and intended to sell immediately 6.6M of its actions at 38 dollars because this equals 250, to pay back its investment. It then has something like 35M actions as a bonus and can sell them whenever they feel it's the best moment to get a few billion dollars. But this can't be considered abnormal : they were intelligent enough to buy a % of fB some time ago, and now that it increased value all of a sudden, they are gonna profit ! Imagine yourself with 30 (dunno the exact value) million of stocks, waiting for you to sell them ? They are currently worth 1 billion dollar and this money comes from nothing.

As usual, an elite won $$$ and the naive little investors feel raped. fB itself as a company has lost a lot in the battle as well, because its value overall dropped by 19 billion dollars after 3 days, and a lot of secondary effects are probably gonna reveal.

And yeah, these are signs of a bubble, but I wonder what would be its cause this time ? Cause the internet bubble was due to the fact people thought it was another revolution like industrialisation, which is not true (internet as wonderful as it is didn't change our life as much as did industrialisation or the previous tech revolutions), but what about now ? Companies that are valued way more than what they are worth because of the lack of an economic model ? Too much faith in social media which in reality are not worth a dime in term of investment in the long term ?
 
This IPO is just indicative that we're in another tech bubble, and it's about to burst.
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i wouldn't say we're in a tech bubble...at least not like we were in the late 90s, i think people just got suckered into it because "OMG FACEBOOKZ!!!", and bought up the stock just because...sort of like all those hipsters who buy up everything apple makes just because it's cool to. it seems like plenty of market analysts and investment guru types were pretty leery of getting in on the facebook IPO due to the fact that shit like yahoo and amazon blew up back in the day at 1st, then tanked later because they don't actually make dick for profits. i'm not an economic expert by any means, but even i knew not to touch this one with a 10 foot pole...at least the yuppies who eat up over-priced apple stock are investing in an established company which actually turns profits and pays a dividend.
 
Yeah; I don't think it's anywhere near the last one because we've sortof learned from our mistakes, but there has certainly been a string of ridiculous prices attached to tech-related stuff lately. Remember the $1billion Instagram purchase? When the monetary worth of a product has absolutely nothing to do with its actual worth, it's a good sign that a bubble is there.
 
If I would to buy some stocks I would do the same as when I'm searching for new music - I'd stay away from it if it's too popular.

EDIT:

because we've sortof learned from our mistakes
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Oh, you have so much to learn. :)
 
As an active foreign exchange trader I know certain amount about the stock market.

If some traders had access to information about facebook, from facebook, that wasn't publicly available then that is insider trading and is a significant violation of market principles and should be illegal.

I personally wouldn't say we're in a tech bubble, I wouldn't even say we're in a facebook bubble. It's just a stock that's overvalued and needs correction, which happened immediately and will probably continue to some extent. What happens to facebook as a company is irrelevant, the tech industry is here to stay.
 
The people I know in big startups would agree. It's not a bubble, but the VC and angels out there are becoming very conservative with their cash again. They're waiting to see what comes of the current crop and see who survives.

I think FB's stock was overvalued for opening, long term it waits to be seen. There's only 2 other tech companies (besides the credit companies) with as much personal info to sell, Google and Amazon. And there's no viable competition (of its size) for the social market space. Just my guess, but I think they'll normalize around $20/share over the summer and then creep up.

John_C said:
I personally wouldn't say we're in a tech bubble, I wouldn't even say we're in a facebook bubble. It's just a stock that's overvalued and needs correction, which happened immediately and will probably continue to some extent. What happens to facebook as a company is irrelevant, the tech industry is here to stay.
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Genius Gone Insane said:
According to the article, isn't that what happened?
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Pretty much, yup. It's a really dodgy loophole which needs to be examined carefully by legislators.

sprack said:
The people I know in big startups would agree. It's not a bubble, but the VC and angels out there are becoming very conservative with their cash again. They're waiting to see what comes of the current crop and see who survives.

I think FB's stock was overvalued for opening, long term it waits to be seen. There's only 2 other tech companies (besides the credit companies) with as much personal info to sell, Google and Amazon. And there's no viable competition (of its size) for the social market space. Just my guess, but I think they'll normalize around $20/share over the summer and then creep up.
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That's almost exactly my outlook also as to how the share-price of facebook will behave in the short term. However, anything longer than a few months depends very strongly on whether facebook manages to keep it's stranglehold on social networking whilst at the same time becoming more profitable, something that i'm much less certain of.
 
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