back to article Facebook IPO plunge sparks tidal wave of lawsuits

Investors in Facebook's IPO are not taking the stock's drubbing lying down and have launched lawsuits against the social network, its underwriters and NASDAQ, while regulators probe the way the debut was handled. Investor Darryl Lazar has filed a class action suit against Facebook, Mark Zuckerberg, the network's early backers …

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Mushroom

Rules of investing

1) Shares can go down as well as up.

2) Don't invest what you can't afford to lose.

3) If it looks too good to be true, it is.

4) Do your own research, don't rely on those employed by the company

There have been articles for some time questioning the FB IPO valuation, so unless there's some malpractice uncovered in the way the IPO was handled, the investors have no one to blame but themselves if they have lost money.

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Re: Rules of investing

The problem here is that the rules of transparency concerning the IPO were not followed so the picture painted to potential investors was untruthful.

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Re: Rules of investing

I think what happened here was a number of investors expected idiots to buy big, and then they could dump the stocks and profit. What they didn't realise was that they were the idiots.

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Re: Rules of investing

I personally believe Facebook is way overvalued but that doesn't mean that Facebook or their underwriters can say X about their books and the reality is actually Y or that investors have no legitimate grievance to sue somebody over when the truth emerges. It is clear here that there were issues about how the IPO was managed which meant it was not conducted in a way which was fair or transparent.

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Re: Rules of investing

If you really take no issue with Morgan instructing ONLY its big investors that it was writing down FB stock at this critical time you are both a tool and a fool because irrespective of the underlying facts, the write-down itself creates the plunge as these big investors both short and refuse to invest in FB. This is pure market fraud, and you think the government should make the public sit back and enjoy it?

WOW.

Do you work on Wall Street?

You have 12 people fooled here with this insane argument. The ignorance illustrates that we have brought all this fraud upon ourselves. We are asking for our pensions to be pilfered and so they are. Amazing.

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Re: Rules of investing

Indeed, under the above poster's pro fraud position, market fraud should NEVER be prosecuted, because, the victim is ALWAYS to blame. Insane. The dude must work on Wall Street.

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Anonymous Coward

Re: Rules of investing

Shares are held on average for 20 seconds, the share price of a company does not represent its value. Stock markets are casions for high frequency traders, they are not for average people to invest in. If you are thinking about buying shares in a company and holding on to them in the hope of making money then you are an idiot, end of. Governments are aware of this, they have let the public sit back and take it for years.

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Re: Rules of investing

I also upvoted Andyf (#13; don't work on Wall Street and do belong to the 99%). Nothing in the post is pro-fraud and the rules given are common-sense that all security investors should internalize and follow. Also:

5. if it isn't clear how the company will make profits, avoid it.

Gamblers who bought in at $38+ anticipating a quick 10% - 20% gain on the post-IPO bump will have to wait, maybe for a long time. Most of the money here was from high-stakes gamblers or institutional investors. The gamblers may need to seek help with their problem, although a lawyer would not be the appropriate professional. Institutional investors may need to be reminded of their fiduciary duty, and their customers might want to engage lawyers for that.

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Stop

Re: Rules of investing

Those who bought and held companies like Microsoft (in the past), IBM, Apple, HP, Intel, Texas Instruments, or AT&T, just to name a few tech companies, haven't done too badly over time. On the other hand, I expect that day traders, on average, have done rather poorly.

In which category would we place Warren Buffett?

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WTF?

Re: Rules of investing

100.000.000.000 / 900.000.000= $111

Not bad...

Who would have thought I'm worth that much as a FB user?!!

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Re: Rules of investing

That would be covered by rule #4 - do your own research! I'm sure a quick Google would have turned up articles here and other sites questioning the valuation of FB.

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Unhappy

How many times do we have to hear

Pop, pop, pop, pop, pop

As the bubble burst.

But my question, who made lots of money from this? Start the investigation there.

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Facepalm

Re: Rules of investing

In this case, the issue is M. Zuckerberg's own inflated perception of himself. Everyone else just drank the koolaid because he said so.

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WTF?

Re: Rules of investing

"If you are thinking about buying shares in a company and holding on to them in the hope of making money then you are an idiot"

really? I have shell, halifax and astra zenica shares. Shell and zenica have done much much better than I paid for, halifax has been a bit of a rollercoaster but still ok. I intend holding onto them (probably worth about 20k in todays money).

Just because bubble companies arent worth shit doesnt mean other companies are.

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Alien

Re: Rules of investing

Must have bought stock in FaceBook......

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Re: Rules of investing

So... If I understand correctly, the professional gamblers didn't do a good enough job trying to "Beat the system"?

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Anonymous Coward

Halifax

"I have shell, halifax and astra zenica shares. Shell and zenica have done much much better than I paid for, halifax has been a bit of a rollercoaster but still ok."

Well, yes... if you call ceasing to exist over 10 years ago "still ok". I think you'll find they then turned into HBOS, which subsequently turned into part of the Lloyds Banking Group. Admittedly there wasn't much press coverage, so you might have missed it.

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Re: Rules of investing

Rule #6: Don't invest based on emotion. Look at the numbers.

Far too many of the small player investors were just FB members wanting to feel even more part of FB and impress their FB friends. They'd be buying based on emotion and were prepared to pay a premium. Heck, they would have bought at $50 . Once they each had their small pile of shares they would stop influencing the stock price and it would have to find its true value which would be a lot lower.

The rule applies all over the place. I know a bloke who lost a pile of money on a start-up touting some bio-tech that "might lead to a cure for cancer". This bloke's father was dying of cancer and he held onto the stocks even though he should have sold. If he had been less emotional and traded when advised he would have made a few hundred k$. However he felt that he had to keep the faith because of his father.

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Gold badge

Re: Rules of investing

Rule #7: Invest in what you personally understand.

Part of the problem is that the FB investors relied on the statements of the banks and FB because hey had no own topical knowledge. It's simple: if you don't understand the business you're investing in, you can be taken for a ride by practically anyone. QED..

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Pirate

Re: Rules of investing

These might be the rules, they are not however the laws governing investments. Once again it seems like the large investment banks have simply ignored and broken the laws. They do this all the time. Every. Single. Day. They are so full of gangsters it is shocking. They caused the current crisis through lies and deceipt. Yet not one of them is in jail.

If you get caught walking down the street with an ounce of marijuana you go to jail. Yet top execs and investers are known to be snorting cocaine as if it were a decongestant and not one of them has had face a court about this.

The financial world is worse than any mafia on this planet. They should ALL be in jail. They are not because doing so would involve too many politicians and others in positions of power.

Better go and live in the Republic of Wadiya...

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Re: Rules of investing

Re-read my post please, specifically the 2nd paragraph - "so unless there's some malpractice uncovered in the way the IPO was handled" etc... and actually take the time to understand it.

I'm not 'profraud', as someone else commented, far from it. If there has been some shifty business in the way the stock has been valued and investors have been misled, then I think they have reason to complain. If not, then they need to be pointing fingers at the nearest mirror.

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Facepalm

Re: Rules of investing....Risk is a factor

For those idiots who thought owning a single share of FB would be neat.

Investing is a form of long-term gambling. It will NOT make most people wealthy overnight.

These stupid lawsuits are just ANOTHER example of how people choose NOT to be accountable for their own actions/decisions.

The judge should throw out these trivial lawsuits.

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Unhappy

So nobody suing Elevation Partners? AKA Bono (Tax Avoider)

Shame would be nice to see him taking a pummelling. Give him something else to wine about.

Pay your Tax Bono you self righteous P rick!

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Happy

Re: So nobody suing Elevation Partners? AKA Bono (Tax Avoider)

Come on guys, Bono can't fill out his tax forms, because he's clapping every second a child dies... give the guy a break...

Not a joke icon for obvious reasons...

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Angel

Re: So nobody suing Elevation Partners? AKA Bono (Tax Avoider)

Every time someone talks about Bono, all I can think about is a South Park episode

"I'm not a number 2, I'm number 1"

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Devil

Re: So nobody suing Elevation Partners? AKA Bono (Tax Avoider)

Bitty.

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JDX
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Good move

The publicity about suing FB is definitely not going to hurt the share price further and add to the farce of the whole situation.

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Paris Hilton

Re: Farce

Now I've got the Benny Hill theme running through my head while Zuckerberg dashes around Wall Street fleeing a string of scantily clad lawyers.

Paris 'cos she's also overvalued and goes down on the first day.

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Happy

Re: Farce

Thanks auburnman, now I do too.

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jai
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Re: Good move

Actually - market has only been open for 25 minutes and the stock is already 2.42% up on it's opening price and increasing.

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Re: Good move

"Actually - market has only been open for 25 minutes and the stock is already 2.42% up on it's opening price and increasing."

Yes, but each day so far has opened with a little rise on the day before where big players try various tricks agreed overnight to try and shore it up. And then it begins to sink. I predicted <$30 by the end of the month. I'm kind of alarmed to think I may actually have been wrong about that. It hit $31.02 yesterday and news of this lawsuit will NOT help.

People can follow the rollercoaster here:

http://uk.finance.yahoo.com/echarts?s=FB#symbol=fb;range=5d;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

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Silver badge

Re: Good move

I personally think it is worth about $1.90, based on its profits, the fact that the market share is at saturation point, and the fact that it is a one-product company at risk of obsolescence when another student does what Zukerberg did in his student days.

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Happy

@jonathanb

"when another student does what Zukerberg did in his student days"

What's that then, steal someone else's idea?

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Facepalm

Aww, diddums...

Did oo get or ickle fingies burnt playing wiv dat nasty fire?

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It's good to think

"I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate,' says Ms. Mary.

Well, you're paid to think that, dear.

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WTF?

Stock and shares are naturally risky.

This is one of those cases of buyer beware.

The stock market is all about risk and frankly the warning signs were there as in the same week with GM pulling out of facebook advertising because it was not cost effective.

Comments on this very site predicted the share price would tank, frankly investors have nobody to blame but themselves for making a bad decision. Now they must accept that their risky gamble did not pay off and stop suing someone else because they are out of pocket.

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Re: Stock and shares are naturally risky.

Love the wall streeters' analysis, market fraud should never be punished because the victim is always to blame.

Just ignore that Morgan was telling its chosen few large investors that they should immediately short what they are pushing on the little guy.

I don't think these are uninterested peeps pushing this pro market fraud analysis. It's patently insane.

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Re: Stock and shares are naturally risky.

My point was that the investors bought into the hype fed to them from Morgan Stanley without researching the facts on their own merit and got burned as a result.

I'm no stock market investor by any means but if even I as a layman can work out the company is overvalued and its price is going to tank after it floats (and most media reported it would do so as well) then those investors are certainly not smart enough to play the market.

I agree that the company should report accurate data to all investors and while that should be punished and enforced to ensure it doesn't happen again, but investors shouldn't expect their money back when they choose to make a bad decision.

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Re: Stock and shares are naturally risky.

Wrong! Those shares are not yet available to short.

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Re: Stock and shares are naturally risky.

The issue seems to be that until the IPO, this was a private company with no requirement to inform all investors at the same time. It would probably be considered morally wrong, but not against the rules to release information to some parties and not others.

To do what is alleged NOW (when the shares are being traded) would be in clear breach of SEC rules, but to refer to this as fraud is missing this distinction. As many people are reminding us in previous comments, IPOs are the epitomy of buyer beware as you have very little information to go on and if you believe the hype from the seller, then you pretty much get what you deserve.

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Anonymous Coward

Re: AnonymousNow

Morgan Stanley produced a valuation report based upon PUBLIC information distributed by FB in their revised IPO prospectus.

Since this report was based upon information available to everybody, Morgan Stanley has the right to distribute the report to as few or as many people and/or institutions they wish to.

You might think it unethical or immoral, especially since they were also underwriting the IPO, but it was not illegal and it was not fraud.

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Anonymous Coward

Glitch in their IPO systems?

Or, securities fraud, plain and simple?

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Coat

I always assumed that IPO meant....

Its

Probably

Over-valued

<-- I've still got my shirt

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Re: I always assumed that IPO meant....

Nice one sir :)

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Thumb Up

Re: I always assumed that IPO meant....

Especially the joke about the shirt.

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Anonymous Coward

Personally...

Personally, any investor who failed to see that one coming really should be fired.

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