Our story so far: Facebook, a wildly overvalued momentary internet phenomena led by an arrogant 28 year old man-child, decided to treat the process of going public with the same respect they do their users’ privacy, which is to say, with none at all. So they went public more or less unlawfully over the past two years, allowing 1000s (or more) outside investors to acquire substantial stakes via secondary markets from their employees and early investors. Note this is within the company’s control, and could have been stopped, but they elected not to do so. When the clamor to dump shares overwhelmed these markets (but not the hype surrounding them), FB decided to do what was described as an IPO, but was in all actuality a secondary.
Flattered and cajoled by the bankers and wankers at Morgan Stanley and Nasdaq respectively, the man-child allowed the Facebook secondary to be bungled by these once-great-now-shite financial firms.
Let’s begin with Morgan Stanley, who wildly over-priced the offering price (and size) by about 4X. They were hemmed in by the inefficient, opaque, clumsy secondary markets that had originally over-priced FB’s shares. Forget $25B, had Morgan Stanley told the man-child and his team that a $40-50B cap was more than reasonable, they would not have gotten the deal. Hence, the once esteemed bankers, down from $100 in 2000, now trading at a paltry $13, have become a shadow of what they once were and were worth . . . So they took the deal.
View Link [ritholtz.com]