Will Facebook soon be a $5 stock? Facebook has seen a tsunami of selling by insiders since May 17 when its IPO raised $16 billion for insiders, early investors, and the firm. Its share price nosedived from $38 to $19.52, around half its IPO price, as of close of business on October 15. There will be even stronger downward price pressures on the stock before year-end.
Investors who bought when Facebook was still private sold enough shares at the IPO to make many multiples of their original investments: Goldman Sachs, Greylock Partners, and Microsoft combined sold 38.5 million shares for more than $1.4 billion. Peter Theil invested $500 thousand in Facebook; since the IPO he’s sold all but 5.6 million of his original 44 million in stages to cash out around $1 billion.
To me, the Facebook IPO is a perfect metaphor for the Barack Obama Economy. It has the awesome sales-pitch. Everybody is excited and nobody had better dare talk it down. All the experts touted the cutting-edge science explaining why it was the best idea for the current situation. Then, we’ll let Christina Romer explain bluntly* what exactly happened next.
So like the Facebook IPO, everyone believed the hype. Like the Facebook IPO, a whole lot of people got sucked in.** Like the Facebook IPO, the promised deliverables never materialized. (See Chart 1 Below).Red Line = Reality. Blue Line = Obamaland
So what would a real recovery look like instead of the Facebook IPO Obama Recovery? Mitt Romney told us quite eloquently last night.
So after the last four years, are more likely or less likely to trust Barack Obama as President? After having watched the spectacular debacle that was the Facebook IPO, are you more likely or less likely to want a few thousand shares in the company? The two questions are roughly analogous. Mitt Romney 2012. That is all.
* – Bluntly = NSFW.
** – It was a whole lot easier to suck in Congressmen of Obama’s own party investing someone else’s money. That critique of my analogy would certainly be fair and accurate.