Archive for the 'Stocks' Category

Welcome to the FOMC Transparency Tour: 1st Stop is the Sausage Factory

Welcome to the FOMC Transparency Tour: 1st Stop is the Sausage Factory

The week at least started well as the upper echelon of fund managers heard from their “well-placed sources” that Helicopter Ben had miscommunicated the FOMC position when he spoke about tapering and would set the record straight at his press conference, imbuing them with the fortitude to get long in front of Wednesday afternoon.   Well, they got half the story right as he did set the record straight.

Taken alone, the FOMC minutes were positive for the market as nothing indicated that policy was going to change course.  The indices acted accordingly, swaying between green and red.  Then we found out that those sources were no more well-placed than a convertible parked beneath a tree with hanging bird feeders.  First, the FOMC projections were released showing that the targeted 6.5% unemployment rate was now forecast to occur in 2014, not 2015, and that GDP growth was accelerating.  Then, just prior to the reporter from TMZ asking Bernanke about his personal plans, his prepared remarks were released. Therein, Helicopter Ben dropped not more cash, but the bomb:

“We also see inflation moving back toward our 2 percent objective over time. If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear. In this scenario, when asset purchases ultimately come to an end, the unemployment rate would likely be in the vicinity of 7 percent, with solid economic growth supporting further job gains—a substantial improvement from the 8.1 percent unemployment rate that prevailed when the Committee announced this program.”

So here we are: the transparency thing as he explained the Fed’s thought process.  The FOMC will begin to cut back this year and, depending upon the next jobs number, may do so before the third quarter ends.  The point that we reach 6.5% has been moved up but that is no longer the trigger; now it is 7% accompanied by an upward bias in the economy and inflation at 2%.  If only they kept that information to themselves we could have read the minutes and gone on our merry way as the market stabilized and perhaps moved higher.  In the old days, pre-openness, the market took the real hit when the rate increase actually occurred and usually upon the move deep into neutral policy territory.  I liked that more because the economy was then on better footing, earnings growth was apparent and valuation could withstand less accommodative policy.  But this is the worst of all worlds since we likely won’t see much growth in earnings this quarter, Europe is still uncertain and China is on the verge of a credit crisis that will make 2008 look like boom times.

I can’t imagine too many visitors to Jimmy Dean’s factory leave the tour and buy a few links in the souvenir shop, anxious to cook them up when they get back to the trailers.  Seems like traders feel the same way about the Fed post press conference, puking out their stocks and bonds, violating important levels of support.  However, once the vision fades and their stomachs settle, a curing period that will likely take us through earnings and up to the next FOMC meeting, they will recognize a great buying opportunity– at least for stocks.  Bonds, unfortunately, will stay in the grinder. For now, though, the carnage, bred through emotion, is likely done as atrophying now takes over.  Within that time frame there will be peaks and valleys as volatility, courtesy of Fed transparency, becomes the norm.  I’m up for nibbling for the long term but the market hasn’t corrected enough to find many real values.

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If Brussel Sprouts Could Do It Why Not Equities

Could brussel sprouts be the new leading indicator for equities?   They have made a helluva comeback, a resurgence and rebranding the likes of which no one has ever seen.  Long gone are the days when entire episodes of sitcoms were devoted to the haters of the innocently hued green vegetable as we witnessed in Leave It To Beaver circa 1960-something.  Put another way, Mel Gibson would have to convert to Hasidism to rival this return to flavor – I mean favor.    BP’s, as those who have been closet lovers of this leafy cabbage affectionately refer to it, are ubiquitous on the menus of the finest restaurants, replacing perennial favorites such as string beans almondine.    Barbecued brussel sprouts, brussel sprout hash, roasted brussel sprouts, Gordon Ramsey and Martha Stewart recipes – all trumpet their chicness.  But what does this have to do with equities?  The point is simple: the hate for brussel sprouts was much more deep seated than it ever was for equities.  To wit: do you recall at any point in your adolescence, despising stocks, turning up your nose and running away from the table when your parents mentioned the stock market?  Of course not.  In fact, it was likely that your school had a stock market game or your parents talked about how they bought you 10 shares of DIS when you were born, a subliminal endorsement of the equities markets.

So if the despised and much maligned brussel sprout can make a comeback of heretofore unforeseen proportions, why not equities?  In fact, the comeback has already started.  Lipper reported that in January, equity and mixed equity funds brought in $62 billion, the largest monthly inflows in 6 years.  Money also flowed into bond funds indicating that cash is likely coming out of the mattress and out of negligible yielding bank accounts.  The flows continued into February, although US equity funds took a vacation last week from gathering assets which could be an indication that the market will soon follow (it has).   But before getting too excited, let’s not forget that the indices have doubled since the market bottom despite massive outflows, thus, in the eyes of the bears, limiting the use of inflows as a correlation.  And supporting the bear case is that long/short equity managers reportedly have the highest net exposure since 2008 at 50-60%. Price action shows us where the love has been spread: consumer discretionary reportedly the highest concentration, financials the largest increase and technology the second biggest underweight. When a feeding frenzy occurs, and we’re not quite there yet, asset values increase ergo the 8% run-up prior to this week.  And for all the self-interested bond fund managers who believe we are not in a bubble, I caution them to start cutting back on their overhead or risk equity fund managers putting in a low ball bid in on their Hamptons homes, that is once they soak up the capacity from a shrinking sell-side equity business model.  Not all the bond assets will flow into equities, but more than enough will find their way to drive the indices higher.

Despite having just experienced a two day sell-off, we are perhaps still overbought.  And depending upon how much or if we further correct in front of the March 1st Washington deadline for mandatory cuts, we could actually trade higher into the event.   Investors are unfortunately accustomed to Washington’s ineffectiveness and if you sold in front of the fiscal cliff, you missed a strong rally.  So having stared down the abyss and survived quite nicely, I doubt a return engagement will be more than a nuisance for the market and, in any event, a much needed respite.  The payroll tax impact may prove to be more of an issue but hopefully a strong jobs number on March 8th will be more of an offset.

And then there is the Fed, China and Europe.  The tide seems to be turning in FOMC blather among the new entrants but is this just a case of the young just feeling their oats, only to be slapped down by the reality of a stumbling economy, or a change in true sentiment?  Bonds remain a short.  China has apparently adopted a bipolar monetary policy, easing for a few months then tightening, allowing the mixed with a downward slope but plenty of firepower and, hopefully, a rebuke of Hollande sooner rather than later.

So pick it: do you want to follow the path of brussel sprouts or do you believe equities more closely resemble Mel Gibson?  I prefer to eat healthy rather than imbibe, although I have removed some of the spice by taking down beta.

APPLE (AAPL): From Innovation To Sustenance

At the time of Steve Jobs death, we wondered how the company would survive, finding solace, but not answers, in a rising stock price. We’re back to wondering.

First, let’s go back in time to a different era when the business was fun and huge compensation packages in return for mediocre efforts were the norm; when institutional investors’ commission budgets had a direct correlation to the ability of their sell-side coverage to navigate around a wine list or was dependent upon how many fistfuls of singles they could carry in their briefcases for a night out on the town; and when CEO’s had a period of adulation that extended beyond that of the latest Billboard #1 single. It was the early 1990’s and I was an institutional salesperson at Salomon Brothers. I had joined Sollie after the Treasury bid rigging scandal, figuring that the bar was set so low that it would be difficult to not stand out because, for the most part, the other senior salespeople who didn’t leave for big contracts at other firms were either lazy or smart enough to know that they were held in higher regard by Sollie management than their skill sets would allow at other firms. I, however, was a research salesperson, not a maitre’d, so I only entertained friends, not clients, because I chose to actually make my living through stock picking prowess. And in choosing this path, I loved companies that were dominant and got there through disruptive technology.

But for all the differences between these two eras of then and now (I never thought I would be in the business long enough to reference different eras but that’s a different discussion), there are a number of similarities and the changing of the guard in innovation is one of them. In the eighties Apple, after much fanfare as the innovator of a new technology for personal computing fell on hard times, exacerbated by the departure of Steve Jobs. In the process it became a single digit midget and instituted a dividend, of all things, in the hopes of drawing greater interest to its stock price. Innovation returned with the return of Jobs although it took a while for a new product cycle to revive the company’s prospects and share price.

Fast forward a few years to when Michael Dell was a rock star, having introduced one of the first virtual business models, essentially the front-runner to the way Amazon does business today. I spent some time with Dell and was duly impressed, marveling at how his real time manufacturing and custom build of PCs drove his stock price to a premium versus the other manufacturers such as Compaq, although its multiple never reached the height lofty heights of Apple’s during the last few years. In fact, even with the sell-off in AAPL, it still enjoys a 50% premium to Dell, even with a supposed bid on the table.

Some of these tech companies were so innovative, powerful, and successful that no one envisioned how far they would eventually fall. Remember when IBM was the niftiest of the nifty 50, only to whither on the vine as mainframe growth slowed and Dell commoditized their PC margins during the early ’90’s. Ultimately IBM came back into favor but never achieved haloed valuation status again.

And there’s Yahoo – the former search innovator struggling to survive; AOL, once most dominant, the only people now using their email service are those of such an advanced age that the arthritis in their hands has prevented them from sending emails for the last 10 years. Sony – the Walkman, the first really portable music player; Motorola – the innovator of the RAZR whose dominance commandeered virtually all the selling space for cell phones, its peak price multiples of what the iPhone retails at.

Then there is Eastman Kodak, patents once so dominant and a franchise once so powerful that not only did it have its own pavilion at the World’s Fair but was also the target of anti-trust lawsuits. Now the only ones making money from EK are bankruptcy lawyers. Add Polaroid, Hewlett Packard, Xerox and even GM and Ford.

And, of course, there’s the Blackberry, which enjoyed a far more dominant position in corporate America than the iPhone ever has. Such a ubiquitous device, its addictive powers so strong that the term “Crackberry” was coined and Blackberry etiquette rules for family and businesses came into being. I recall far more late night TV routines on Crackberry addicts than I do on those tethered to an iPhone. RIMM is yet another technology innovator struggling to survive.

Fast forward to the present, back to Apple. It has had a great run as a stock and a company based upon the iPod, the iPhone and iPad. The desktops and laptops are high margin, high cost products that have struggled to gain significant penetration into corporations whereas Apple’s personal devices have been valued as much for their cutting edge technology as their cool factor. All aspects of the company experience are positive – from the stock price to the commercials, to the Steve Jobs impact on tech company CEO sartorial preferences.

Thus the seminal questions: can Apple do what no other company has ever done by continuing to be an innovation leader without ultimately ceding their edge to others? Can it continue to command premium pricing for its products when others are putting forth better technology at lower price points? Has the coolness factor taken too much of a hit, owing to a stock about which cocktail party conversation has become “I sold my stock at $700 and bought FB at $18” instead of “I bought more AAPL at $600?”

I had an iPad 2 and as I have mentioned before, gave it to my daughter (well, sold it to her but have yet to collect. She’s like the govt., kicking the obligation down the road.) When I went to buy an iPad 3, the salesman told me there was nothing really new. In fact, away from size, the mini has even regressed from a technology perspective. There’s not too much new technology in the iPhone 5 either and the Galaxy is more advanced and cheaper. I actually believe the coolness factor of the iPhone has, until now, driven sales more than innovation and ease of use but as saturation has mitigated the power of first adopters and Apple sycophants run into budget constraints, price is beginning to matter, particularly when functionality is also important.

The telcos have wised up, realizing that they in fact are the true king makers and can drive product acceptance as long as they have something to work with in terms of price and technology. Samsung and Nokia give them that and China mobile gets it, drawing a hard line with Apple.

So where are we? Apple needs a big quarter and great guidance for the next quarter, margins and unit sales never being more important. But mostly, it needs new, truly innovative, technologically advanced products. I don’t know if it is coming or not, but I do see growth slowing and this has resulted in a P/E that has continued to contract away from that of globally branded, high growth companies, to a typical retail or highly cyclical company. At least for now, with AAPL being a show me stock, I’m not sure this is wrong. I am concerned, however, about the possibility of lower price point products because this leads to the oft spoken and seldom effective strategy summarized by “we’ll make it up on volume.” That strategy often leads to slower growth and weaker earnings. Part of the appeal of Apple products has been its exclusivity and a large part of the appeal of its stock has been the fat margins.

Bottom Line: (I know – long overdue): In a rising market, I believe that Apple will be a decent stock. Too much cash to ignore; too much innovation that they can buy. The brand is not damaged in the least, which is a critical consideration. Perhaps still too widely owned, it has been attractive to both value and growth investors for quite some time so I struggle with identifying the marginal or new buyer. I am also worried about the current quarter but perhaps that is discounted in the shares although should it miss 3 quarters in a row investors may wait to get on board. Throughout the entire cycle, Apple has taken advantage of the consumer through premium pricing. Now, as a prospective shareholder, the shoe is on the other foot so I’m looking for a bigger discount to the share price. I do stand willing to pay up if the cool factor comes back – along with new products. In fact, the worst thing that can be said about Apple is that it’s a tech company. Altria, a declining business if there ever was one with no innovation and a paltry growth rate, sells at a significant premium to AAPL owing to a large dividend. It’s a strange world.

Here’s what bestselling author Todd Bucholz has to say about my new novel – UNHEDGED:

 UNHEDGED will take you hostage–sweeping you into a dangerous world where the

quest for big money dominates and good people struggle to escape. You won’t break free until you get to the last page.”

http://www.amazon.com/Unhedged-Novel-About-Killing-Market/dp/0786754745/ref=sr_1_1?s=books&ie=UTF8&qid=1358202333&sr=1-1&keywords=unhedged

 

So Long Vikram, Hope You Had Fun. Say Hi to Sally. Citi.

Citi

I have never owned Citi shares until I began purchasing it in the pre-market today, preferring to root my bank exposure in JPM and BAC.  To me, the appointment of Vikram Pandit as CEO was an extremely poor decision.  What exactly in his background, aside from political savvy – a requirement for ascension in the sell-side world, qualified him to lead what was the world’s largest, most complex financial institution during the worst financial crisis ever seen?  Perhaps it was his ability to sell his mediocre hedge fund, that would subsequently fail, to Citi for nearly a billion dollars? I guess the then BOD valued negotiating skills more than commercial bank experience.

Pandit’s tenure was marked by numerous missteps: the submission of his plan to return capital to shareholders resoundingly rebuffed; the sale of the brokerage arm to Morgan Stanley, consummated for an astounding $4.7 billion less than he had apparently advised the BOD it was worth in the sale – an even more enormous miss when taking into account that the final price was settled at less than $13.5 billion; and what about the stock price – it has lagged all the other major banks and still hovering near its ’09 lows.

John Haven’s picture hangs in the man cave of every block trader who ever traded on Wall Street.  Those who move on from block trading on the sell-side find themselves working at hedge funds, playing golf, or in extreme cases, dispatching taxis.  In fairness, Havens is very bright and did a fine job running the institutional equity department at Morgan Stanley but again, not exactly qualified to run a major commercial bank.

I chuckle at the pundits espousing how surprised everyone was about this move, alleging something nefarious.  Citi just reported their quarter, their financials and disclosures never more current than today.  Given that, it was the best time to make this move.  Of course this took the press and rank and file by surprise; BOD’s don’t hold open meetings.  I applaud Citi’s BOD for their discretion.  As to questions about Pandit’s compensation, we finally get a shareholder base that paid attention to the performance of its stock, aligning CEO’s compensation to shareholders interests.  Let this be a warning shot to other CEOs.  And to those who had questions about Pandit’s stewardship but now bemoan his firing after a “great” quarter –  com’on!  After years of disappointments, expectations were finally reduced to his level of expertise.

On the positive side, both Havens and Pandit punched above their weight but were far less than ideal stewards of Citi’s fate.

Perhaps I’m just jealous.

Damn! I know That Invite Was Here Somewhere

merci, ben

danke, ben

謝謝你,本

Gracias, Ben

ベン、ありがとうございました

σας ευχαριστώ, ben

شكرا لكم، بن

 

The world over, in every language, from French to Mandarin to Greek to Arabic, the same words are being spoken with incredible enthusiasm, often in a voice that cracks with unbridled emotion and gratitude.  They are 3 simple words: Thank you, Ben.  But there are always the forgotten ones, those who declined the invite. Now, they lay in their beds, pulling their pillows tightly over their heads, cursing the loud music and laughter coming from next door as they hold firm to their righteous beliefs that such frivolity does no one any good, it’s too late, it’s too dangerous, it’s sacrilege, it’s too Keynesian.  Good luck with handling the outflows.

 

Frankly, I don’t care if Keynes is throwing the party, or Bernanke or Draghi.  All I want is to have a good time.  I don’t care if the host pays the caterer after I leave or doesn’t – ain’t my problem, ain’t my job.  And cleaning up – that ain’t my job either, I’ll be long gone before the mess has to be cleaned up.

 

I was in a similar situation once.  I was in college, working weekends at a job that started at 6 AM so I decided to go to bed early. It wasn’t my usual M.O. but I had peaked earlier in the week and was exhausted. With the party in the dorm just getting going, I found myself tossing and turning and cursing out those morons next door.  Finally, I threw off the covers and threw on the jeans and joined in.  Someone else would have to throw the towels in the washer at the tennis club (or I would just fold the dirty ones – who would know? They sweat like pigs anyway).

 

So the bears have a choice: let common sense and a strong belief that what Bernanke is doing is wrong and miss the party or say “what the hell” and join in. If they’re smart, they took the latter route and realized that it’s not their job to debate economic policy and what the long term impact of QE’s will be; it’s their job to make money and when the world over is easing – except for the Chinese who’s contribution is to pay lip service to it – you have to lift the glass.

 

Thus the only question is how much of a good time is too much?  Can I throw back that lost jelly shot or is it time to hail a cab and head home.  For me, my margin of error is sometime before Rosie O’Donnell starts looking like Kate Upton and when I start talking about how, at 5’8” inches (maybe), I used to be able to dunk a basketball. But having been around long enough, I’m not going to get greedy.  I’ll be back to shorting materials soon but for now I drink the castor oil and am long some of the worst positioned companies I could find: steel and iron ore. I do feel guilty going to the dark side but these are only trades.

 

My favorite quote of the day comes from Home Depot as they announce the closure of 7 big boxes in China:

 

“China is a do-it-for-me market, not a do-it-yourself market, so we have to adjust,” the company said, although the country’s slowing economy is also not helping.

 

Are these really the same people that are going to take over the world?  They can’t even find their Chosen One although I had heard he was spotted in Macau driving a Ferrari with a Pamela Anderson look-alike (circa 1998) in the passenger seat while looking for a role as an extra on The Hangover III.

Playing Poker with the EU: Why There Won’t Be A QE 3

Wistful visions of a Bernanke Put have kept many invested. It is everything they want it to be: the lifeline, the safety net, the impetus for economic growth.  However, I believe it is unlikely to happen.  The logic is simple: Europe is much more fiscally troubled than the US and is arguably the source of not only market turmoil but also for economic angst in the US.  Without a shock and awe resolution from the EU, any further easing from the US will be ineffective in reversing our declining economic fortunes so why waste the powder.  And with Europe in much more desperate shape, in recession , broadly, and possibly headed toward a depression in Spain (Greece there already) it is much more incumbent upon the EU to provide a shock and awe solution to their economic woes sooner rather than later.  Additionally, Bernanke has come under significant criticism for his prior QE’s so why not let Europe do the heavy lifting this time around?  The European solution, if credible, will obviate the need for further stimulus from the US.  China keeps threatening to stimulate their economy and should this happen,  this could also lessen the burden on the American economy.   If I were Bernanke, I would play this hand to conclusion.  Not even another deficient jobs number will change my view.  In fact, I believe that the payroll report will come in above consensus based upon what I hear from my source who has been almost clairvoyant in their forecasts based upon real-time information.  They see strength across all sectors.  It won’t be a blow out number but should be comfortably above consensus.  This will lead to a short covering rally and a good opportunity to lower exposure

Separately, a great review for The Big Win http://seekingalpha.com/article/625331-book-review-the-big-win :

Book Review: The Big Win
Just as whale watching is a popular adventure tour for nature lovers, reading about the whales of finance is a popular pastime for investors. InThe Big Win: Learning from the Legends to Become a More Successful Investor (Wiley, 2012) Stephen L. Weiss profiles one woman and seven men who have truly excelled.

First, a caveat about what Weiss describes as “the ugly reality of whale watching,” by which he means “blindly following large, smart buyers into a stock or other investment.” (p. 25)

 

Unless an investor has insight into the whale’s rationale for making a particular investment, his time frame, and his risk appetite, the investor is at a considerable disadvantage. It is critically important, as Weiss writes, to “understand the process. … The true value of these case studies … is in understanding each investor’s methods, not standing in awe of their results.” (pp. 32-33)

 

Weiss’s eight legends—Renée Haugerud, James S. Chanos, Lee Ainslie, Chuck Royce, A. Alfred Taubman, James Beeland Rogers Jr., R. Donahue Peebles, and Martin J. Whitman— each carved out a niche and developed an investing style.

Haugerud, for instance, is a top-down investor. Her hedge fund, Galtere Ltd., has a five-stage investment process: taking the temperature of the global markets, developing a few themes, microanalyzing and selecting strategic investments, timing trades technically, and applying risk management. Her “big win” came in 1993. With gold trading as much as 40% above the world’s highest cost of production and the one-year bonds of Canada’s western provinces yielding 9 to 12%, she shorted gold for a rate of less than 1%, bought the bonds, and hedged her short gold position with undervalued small-cap stocks of mining producers in Australia that had high margins and low production costs. “‘All three legs worked,’ as Haugerud puts it, and all kept working for a good long while. It was a simple trade, and the returns were good enough to carry that year’s performance to her stated goal and beyond.” (p. 50)

Chanos is a short seller, Ainslie a stock picker, Royce a small cap investor. Taubman and Peebles are both real estate developers, Rogers is a commodities investor, and Whitman is best known as a distressed debt investor.

What do all these legends have in common? Weiss catalogs seven traits: no emotion, no ego, long-term investors, discipline, thorough research process, passion and work ethic, and drive. Or, reduced to six words:

 

“Drive. Passion. Process. Equanimity. Discipline. Humility. These are the commonalities between all those profiled in this book and the qualities that make for a great—and legendary—investor.” (p. 17)

 

The Big Win is an easy, thoroughly enjoyable read for those who want to learn from the whales.

Facebook Pt 2: A Wall Street Insider’s Perspective

Prior to the pricing of Facebook’s IPO, not one institutional investor I spoke with expected a successful offering. In fact, I had said on Fast Money that I would sell any shares I received as soon as I could.  I had a bet with a noted hedge fund manager on the size and pricing of the deal.  He had believed that it would price at the mid-point of the original range.  My bet was an increase in size and price; I won lunch.

Having been involved in the pricing of hundreds of deals during my time on the sell-side of Wall Street, I can tell you that kowtowing to FB management, hubris and greed led to a failed transaction.  Facebook may also be to blame for the  poor performance since it appears that they took a much more active role than most other issuers usually do during an IPO process.  I can tell you that it is unlikely that the other “lead” managers had anything to do with the mechanics of the offering since they rarely do; they are there in name only.

Morgan Stanley had a lot at stake; they likely won the lead mandate based upon their view on pricing and size as well as their distribution capabilities through retail, a sales force that GS doesn’t have.  MS was not going to be the lead manager of the first “hot” tech transaction, the largest ever tech IPO, not to upsize on price and size, nor were they going to lose the lead role to a competitor.  They focused on the front end, hoping the back end would take care of itself.  My guess is that they pitched FB a valuation higher than the other firms seeking the business whereas the right thing to do would have been to start the price lower and then walk it up into the original range.  This was their first fatal mistake since they left themselves no margin for error.  Not increasing the filing range would have been a mistake since it would have sent a negative message about demand, but increasing the size significantly was a much bigger misstep. But, hey, more shares and a higher price equate to more fees for the underwriter.  And , of course, a more hallowed place in the record books.

Institutional investors were uncomfortable with such a large retail component – it is usually the sign of a poorly accepted transaction although, in this situation, their participation was strategized into the process from the outset.  And with all the hype, institutions believed that if the deal went south, retail would panic and sell.  The news flow was also terrible: GM dropping, the ad model being questioned and constant commentary on valuation.  When I was involved in a transaction I almost always received calls from Portfolio Managers cautioning me on price and size; MS undoubtedly received these calls too but ignored them, as I often did.  Institutions nonetheless piled into the deal figuring that MS had to support the transaction with a long lasting syndicate bid.  A free put is nothing to turn down.  As such it didn’t take long for MS to eat away at the capital allocated to support the share price and my guess is that they first took a stand above the issuance price, realizing that if FB traded to issue, it would trade through it in a heartbeat.  But FB, being THE trophy deal of the millennium, used their weight to get MS to take a large discount in their fees.  As with a lot of items bought on sale, there is a reason why the price is low.  In this case, the attendant discount manifested itself in less capital in the syndicate bid.

So lots of blame to go around, hindsight being 20/20 except of course for the smarter, professional investor who had it pegged from the start.  Overhyped and overvalued.  The NASDAQ technology glitches – those were icing on the proverbial cake.

At the end of the day, a troubled start to life as a public company should not have a long lasting impact on its stock price.  That will be the result of its ability to execute on its business model and the valuation investors assign to the company.  On this, I have no opinion.


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