Facebook IPO – Diamond or Coal?

See we were all so excited when the Facebook IPO was announced. After all, it’s THE premiere social network. How could we NOT make money? This could be just like Google, right?

Well, maybe not.

Speculations aside, there were some very interesting things that happened before, during and after the IPO.

Before

Prior to the official IPO, Facebook raised billions of dollars through private investors using “D-Rounds”. This gives company insiders an opportunity to “cash-out” before the IPO. This potentially sucked a lot of the value out of the company before public investors had the opportunity to make much money

During

Morgan Stanley’s analyst reduced his revenue forecast for the company. It is not clear whether or not this information was shared with all investment firms, or just a select few. This was done right in the middle of the “IPO Roadshow”, an unprecidented event in IPO-land.

After

As the news about pre-IPO devaluation, earnings forecasts reductions in the middle of the IPO, and now possible SEC investigations into the whole mess has emerged, the stock has fallen from its IPO price of $38 a share, down to closing at $31 a share on Tuesday.

The question remains – what does this mean for Facebook, it’s stock value, and the millions of people who gambled money on the IPO in hopes of a big return? And that’s exactly the point – the stock market is ALWAYS a gamble. I suppose the difference is, you count on a legal game. But when those “in the know” potentially took an opportunity to make money and didn’t inform the public about potential earning issues that could effect the upcoming IPO,  I think someone needs to look closely at what happened.

We are, after all, the reason why Facebook exists. The public. WE post our status updates. WE post our pictures. WE share our lives, our feeling and our thoughts, on a web site for most to see. And Facebook uses OUR participation as a means to generate advertising revenue. Without US, Facebook would be what MySpace is now. Should we expect fair and accurate information to be released from the company WE built when we have the opportunity to invest in it? Or, should we just DO-AC ?

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