The highly-anticipated Facebook IPO was plagued with problems, potentially costing thousands of dollars to many small investors and further damaging Wall Street’s reputation on Main Street. A Wall Street Journal report.

(I have a small cameo in this)


9:50
WSJ 6/10/2012

Category: IPOs, Valuation, Video

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

3 Responses to “Unfriended: The Facebook IPO Debacle”

  1. EIB says:

    This segment is an outright lie.

    How did his account go “negative” if he had 40k. Even at 100% margin (and I am not sure they will even let you margin an IPO on day 1), that is 80k in FB. They liquidated his shares around 31. That is about 20% drop. 20% of 80k = 16k. This story is BULLSHIT.

    If his account had 40k in it, the system won’t even accept order for 150k. This story is BS.

    Also, there is NO chance that he didn’t have the shares for 5 days. Maybe he didn’t check his account for 5 days. But that is not the same thing.

    ——–

    “Can I purchase shares of an initial public offering offered through the OpenIPO process on margin?
    Regulations governing IPOs state that new issues are not marginable for at least 30 days following pricing. Therefore, IPO shares must be paid for using cash or cash available to borrow.”

    ~~~

    BR: That didn’t make sense to me either — unless he was purchasing it on 10 to 1 leverage . . .

  2. wadethetrade says:

    What was this guy doing ordering 3400 shares at 46? It sure looks like it based on the screen shots of his trading account. For a guy w/ a $40M account he was willing to invest $156,400 and he didn’t expect a margin call for the balance? EIB is correct that you can’t use IPO shares as collateral for a margin account for the first 30 days but the exchange doesn’t look at his account equity when accepting orders. That would only be a risk management function at his broker.

    So lets say he made a mistake and purchased the 3400 at 46 and didn’t find out in time like many others that day. It wasn’t clear whether the broker sold him out at 31 or if he initiated another trade himself, but that could have wiped him out either way. The real story looks like he was planning on free riding this one for a first day pop and it did not work out as planned. (certainly he had the extra $ in another account to settle the 3400 share trade, right?)

  3. wannabe says:

    This topic came up at lunch the other day. I said I knew to stay well away from reading Ritholtz and Brown every day. Somebody said “damn, I wish I had… I got burned.”

    Got you one more reader.