I wish more people had the commonsense of this man:
“I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn’t bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn’t the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you. In this case it was me.”
This are remarks, reported by Bloomberg, of a man called Mark Cuban, who owns a US basketball team. He could have pointed the finger at the various Facebook honchos, or blamed the fiasco of the Facebook IPO on the Nasdaq, or some eeeevil Wall Street bankers, or some-such, but he didn’t. He knew that buying shares in a newly listed firm is risky; it is particularly risky in such a relatively novel field as social media where the revenue model is not always very clear to discern.
The FB share debacle is a million miles away from the sort of loss that happened because of, say, a Ponzi fraudster such as Madoff, or the like. FB put itself up in the public market; a lot of people said how splendid this was going to be, and some rich people got richer, some lost a lot of money, and others have broken even. That’s how it is.
Recently I found myself reading a piece about how Frank Gehry (who designed the eye-catchingly resplendent Disney Hall in Los Angeles) is now hard at work designing a huge new custom built HQ for Facebook.
This Cuban guy, presumably, never heard about this circumstance. I bet the guy who sold him the shares did.
Hey, don’t underestimate Mark Cuban.
He was great on CNBC this (9/7) a m.
He also stood up and fought the U S allegations against him, instead of folding, and making the pay-off, “without admitting guilt” crappola.
Traditionally, the reason for an IPO is to raise money for further expansion of the company, or at least to provide a way to make it possible to raise money in future, if it is deemed necessary. Therefore you choose a price for the IPO that is below the fair value of the shares, and the new shareholders make a quick profit, leading to good sentiment towards your company for potential investors going forward. The price is that existing shareholders have the value of their own shares reduced a bit.
Facebook on the other hand has plenty of cash flow, no need to raise money, and can’t see itself ever needing any. So the purpose of their IPO was to comply with securities laws and to make it easy for existing shareholders to sell their shares if they wanted to. Therefore the price for the IPO was above the fair value for the shares, the new shareholders made a quick loss, and the existing shareholders had the value of their shares increased a bit (relative to fair value, rather than the IPO price). The new investors ended up pissed of with management, but management doesn’t give a shit.
However, anyone thinking of investing should have been able to figure this out. That they didn’t was totally their own problem. Mark Cuban is smart enough to have figured this out, but I suspect that he also thought that there would be enough silly sentiment to cause the stock to rise a bit before it fell, and he intended to take advantage of that.
Oh COME ON!
IMHO the FB IPO was simply a vehicle for it’s biggest
stockholders to actually get cash for their underperforming, and unpromising venture.
Saw it comming from a mile away. Needless to say I didn’t “invest”. Not “other peoples money” and certainly not my own.
This is yet another example why an education in um…”history” of human behavior (SEE: Aesops Fables, Brothers Grimm, 1001 Arabian Nights, Koran, Bible, etc…) is a FAR superior “investment” (by self or “others”)than …say…formal, and inexplicably expensive, “humanities” crap.
A certificate of demonstrable comprehension of “uncomplicated” math MAY be useful as well.
I just can’t ascribe current practical ignorance of wide- spread college (so-called) “educated” folk as a mere Fluke(et al).
Michael: I’ve been saying since day one, the Facebook IPO was the best IPO in modern history. It’s basically the only one that didn’t leave huge sums of cash on the table. It’s like the AOL/Time Warner deal – from AOL’s point of view, it’s the best deal imaginable, because they traded their worthless AOL stock for a big slice of a real company.
I agree with Alsadius. If I were an existing shareholder of a company whose IPO price took off I’d be pissed at my management (and the underwriters), who unnecessarily diluted my holdings and left real money on the table.
Nice comment by Cuban. I’m not a great fan* of his (he’s far too much in bed with Obama and the socialist wing of the Democratic Party for my taste), but this comment is spot on and surprisingly honest. Good job.
* Although he did a nice series of cameo apprearances on the TV show Entourage a few years ago!
Laird is correct – there is a lot of bad stuff about M. Cuban.
However, this quote is good.
It is honest.