We have all witnessed a multitude of examples where corporations and the people who own and/or run them have displayed an amazing amount greed, which can come in so many different forms, flavors, and varieties. Like many people I followed the Facebook IPO out of curiosity given that it just seems to exemplify greed.
I wasn’t about to touch the stock as an investment because I felt it was overpriced and I really didn’t see how one could value it at around $100 billion. It made no sense. I read a lot of articles and not one could change my mind—granted most couldn’t even muster enough data to justify purchasing the stock at the price that FB listed on the high end. What further surprised me was that Mr. Zuckerberg retained such a large portion of voting stock in the company and why the market would tolerate and support this (although I am sure there are other examples). So many things stunk on this deal that I was amazed to see it issue where it did, but there was no surprise as the stock sunk after a few hours and has continued to show weakness.
Much of the media and press on this deal and what amounted to potential issues that likely violated securities laws just don’t seem to be positive. I’ve started wondering myself what I get out of FB on a personal level and why I even bother spending my time there as a person. If I want to buy something I go to Amazon (or maybe a specific vendor site). I’ve never clicked on an advertisement. FB does provide a neat way to like a brand and follow people and companies. But is it really any wonder that millions of people are Apple and Starbucks fans? For new businesses, products, and events I can see some value in FB, and perhaps companies are seeing an increase in revenue / penetration as a result of FB. But on a personal level I am not sure what I am getting out of FB and given that maybe 7% of our network sees postings, why bother? So from that point of view it just seems odd that the site grabs so much attention and time. Given that the press indicates that Zuckerberg is more about social media than business it’s a curious factor on how the company will monetize the business to justify the lofty valuation and provide the catalyst for growth. Clearly there are opportunities and not a day seems to go by where we don’t some story about social media. But as the media points out this whole issuance was about raising money, not awareness. Lots of the money went to early investors and insiders. The company apparently already had a large cash cushion, the largest of a US company holding cash in the United States according to one article I read. Needless to say it’s a wonder why a company with so much cash would really need equity financing and given what I’ve heard about Mr Zuckerberg’s personality and control issues it just makes me pause.
So we could probably go on and on with examples of greed, covering all sorts of examples of CEOs, securities offenders (Enron, Worldcomm, etc.), and the like. But the question becomes where does the greed get checked at the door and who in an organization should be responsible for administering controls and procedures to address the problem? One could say it’s senior management and others might say the board of directors. Either way there’s a problem here and even the best of the class organizations fall victim to the easy way out mentality-just think of the Pinto and how the car was allowed into production with the known issue of the flammable rear end gas thank. When looking at the IPO market there is a wide range of successes and failures. With so much hype and the promise of supposedly “quick and easy money” it is easy to understand the market dynamics and the near feeding frenzy seen with high profile listings. So if you show a rabbit a carrot how would you not expect the rabbit to not want to eat it? This principle would seem to apply to investing in high profile stocks. In end money and the potential of making money really seem to have a remarkable impact of behavior and actions.