Facebook IPO: Why It Went Wrong and Why It Matters

I foolishly hoped the Facebook IPO might actually bring some confidence back to Wall Street.

What was I thinking?

Turns out it’s just another example of how the soulless Wall Street culture is destroying American style capitalism.

We have barely gotten past JP Morgan Chase’s $3 billion catastrophe, and the outrage over their foolish decisions, but here we are again. The attention span on Wall Street seems equivalent to that of a small child.

Scott Udine, a broker friend of mine, said it best, “The brokerage firm community is made up of salesmen and people that mainly care about THEIR bottom-line….not yours!!! They will sell anything, say anything and do anything.”

Morgan Stanley over sold and over hyped too many shares of Facebook to an unsuspecting public, while quietly telling large institutional investors another story. And to add insult to injury NASDAQ had such huge headaches processing all the buy, sell and cancellation orders that they now admit the whole IPO was an unmitigated disaster.

So once again its heads, the banks win, and tails, you lose.

Morgan Stanley changed the game as the lineup was being announced. It reeks of impropriety. Anybody in the stock business will tell you it is practically unheard of.

I can only add this to the mounting list of evidence against the too-big-to-fail and too-big-to-jail banksters and sigh in disgust.

If you’re wondering why a foreclosure defense attorney is up-in-arms about a stock offering, it is because the same shady tactics that have led homeowners to my office are the same ones on display here.

Just as the banks tried to sell mortgages they knew were garbage as “safe” investments, Morgan Stanley pushed Facebook stock that probably wasn’t worth the paper it was printed on.

The only difference here is that unlike with the foreclosure crisis and robosigning, we are seeing everything unfold as it happens, in real time.

I only pray that the regulators in Washington aren’t asleep at the wheel and will actually do something about it. Unlike with the JP Morgan loss, this isn’t their money that went down the tubes.

It’s yours.

The Facebook debacle is indicative of why less and less companies are going public. Smart people just don’t trust Wall Street, and now I suspect no ones does. Since 1997 the drop in companies going public has been a whopping 48 percent. No wonder.

America better not think it has a monopoly on economic engines, or that its model is the only game in town.

Just look at China, where 80 percent of their companies are State Owned Enterprises. In Russia SEOs make up 62 percent while it is 38 percent in Brazil. This is the new global model, and right now it’s making our economic template look out of touch and out of date.

If our system is going to compete with these entities we need to make sure it is not broken, and today it is sure looks like it is.

From The Trenches,

Roy Oppenheim