So it's been not quite two weeks since Facebook went public, and I think the stock price itself is almost the boring part of the story at this point. Everybody and their uncle has already written the "wow, Facebook stock tanked" post. It opened at $38 a share on the 18th, and as of this week it's sitting well under $30. Fine. We get it. Line went down.
What I keep thinking about instead is the Morgan Stanley thing, because it's a much better story than "stock went down" and it explains WHY the stock went down, or at least why the drop felt so bitter to regular people who bought in on day one.
Here's the short version, in case you missed it under the pile of other IPO coverage: in the days right before the IPO, Morgan Stanley's lead analyst on the deal quietly cut his revenue growth estimates for Facebook. That's a pretty big deal to know about if you're deciding whether to buy a stock at $38. Except that info didn't go out to everybody. It went to select institutional clients, the big money, the guys with Bloomberg terminals and standing phone calls with their broker. Regular retail investors who bought through their E*TRADE account or whatever got none of that. They just got the hype and the "like" button and the hoodie guy ringing the Nasdaq bell by videolink from Menlo Park.
Massachusetts securities regulator William Galvin already subpoenaed Morgan Stanley over it. There are lawsuits piling up now naming Facebook, Zuckerberg, and the underwriting banks, arguing exactly this: that the important information didn't reach everyone at the same time, and that's supposed to be illegal for a reason. I'm not a lawyer and I have no idea how this plays out in court. But as a plain description of what happened, "the big clients got the real numbers and the small investors didn't" is about as clean an indictment of how Wall Street actually works as you're going to get, and it happened in broad daylight around one of the most hyped tech IPOs in years.
And then on top of that you had Nasdaq's own systems basically falling over on opening day, delaying the start of trading and leaving people not knowing for hours whether their orders even went through. Two separate messes stacked on top of each other, one technical and one, lets be honest, kind of shady, and both landing on the same stock in the same week.
I didn't buy any Facebook stock, for what it's worth, and I wasn't tempted even a little. Not because I predicted any of this specifically, I'm not that smart, but because I've been a daily Facebook user since roughly forever at this point and my honest read of the product lately is that it's getting worse to use, not better. More ads jammed into the feed, more of that weird sponsored-story stuff where your friend "likes" a brand and suddenly it's in your timeline. A company can absolutely make a ton of money while its actual product experience degrades for the people using it every day, those two things aren't related at all really, but it made we personally uninterested in owning a piece of it. Somebody I know bought in at $38 because "it's Facebook, it's a sure thing," and I didn't say anything at the time because what do you say, but man.
I don't think this kills Facebook the company, not even close, they've got a billion-ish users and that's not evaporating over a bad two weeks on the stock market. But I do think this is the story that actually matters out of the whole IPO circus, more than the ticker symbol, more than the opening bell. The gap between what the people with money knew and what everyone else got told. That gap is the whole story, the stock price is just the part of it you can graph.
Anyway. Back to normal posting around here soon, I've got a couple of half finished drafts sitting around about server stuff I should probably get to instead of reading financial news at midnight.