Facebook – My Take

From the Fidelity website (3 days and counting):


Warning:
  • Facebook
    Fidelity continues to deal with the aftermath of Friday’s market issues in delayed processing of orders for Facebook (FB) stock. As they did then, Fidelity’s systems continue to operate normally. Although some executions were reported back from market makers over the weekend, we are still waiting for final responses on other orders. This is an industry-wide issue and we are working aggressively to address it. We appreciate your continued patience.

What some had inexplicably hoped would be a catalyst to bring the retail investor back to the equity markets has added yet another reason to stay away.  Apparently the largest allocations to Fidelity investors were 100 – 150 shares, the average I have heard being 50 shares.  Participation was limited to accounts with a balance of at least $500,000 and had a certain level of activity.  These requirements further narrowed the number of eligible buyers.  Yet despite such limited participation, Fidelity’s retail investors still don’t know if they sold their stock, where they sold it or if they sold it.  Now, with a balance of at least half a million, the hit should be small but the psychological impact wil be much larger.  As these stories spread, investor confidence wil be further eroded.  Of course, none of this is Fidelity’s fault but rather NASDAQ.  However, all will suffer in the aftermath and we see volumes continue to dry up even despite yesterday’s rally.

So why was it ludicrous to believe that a successful FB IPO would bring back the retail investor?  First of all, the deal was too hyped, too richly valued and too big to succeed in spectacular fashion.  But even if it did, the news on other fronts, in particular Europe, provides too much uncertainty.  At most it would have been a respite from the realities.  The best hope we have for the markets is shock and awe from Europe.  I’m not counting on it.

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