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Saturday, May 19, 2012


It was the biggest IPO in US history and everyone was clamoring to get in on it.  And it could well be the biggest scam since Fannie & Freddie cooked the books.  
The insiders sold the public about $16 billion worth of stock, making a bunch of new paper billionaires.  But the hype was more gut than analysis.  There are millions of people with Facebook accounts and they all wanted some of the stock. 
Is there a case to be made for the longevity of Facebook, or are people going to go to the next thing after they get tired of posting pictures and messages for their friends and find that most of those messages are really not very interesting?  What are the barriers to entry for competition?  What about other sites like LinkedIn?  What about GM’s announcement that it was dropping Facebook advertising because it wasn’t effective?   What about the syndicate that underwrote Facebook having to come into the market and buy stock to keep the price above the $38 offering price?  
It’s dangerous and financially risky to invest in fads, unless you can find a greater fool to take the stock off your hands at a higher price than you paid before it crashes.  28 year-old Mark Zuckerberg found a bunch of suckers to make him one of the richest men on the planet.  My money is on the prediction that he will be unloading more of his stock as soon as he’s legally allowed. 

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