The Facebook (NASDAQ:FB) IPO may be the biggest scam on Wall Street ever.
That's because everyone on Wall Street is in on it. Unlike tech companies that went public during the 1990s tech bubble, which were closely held by venture capitalists and management, Facebook has had an informal market in its shares for years. You show me a major institution that currently holds none of it and I'll show you a firm that's not really playing.
This is not to put down the company as a whole. I really like their Open Compute Project which hosted a meeting in San Antonio this week for its Open Rack project. (Why San Antonio? It's the home of Rackspace, sponsors of Open Stack, the cloud infrastructure project. Also, nachos.) Open Rack will do for cloud hardware what Open Stack is doing for software - standardize it under an open source license that anyone can use.
Facebook has also open sourced Ringmark, its mobile test suite. It's part of a World Wide Web Consortium (W3C) project aimed at making mobile web apps easier to create and, of course, non-proprietary.
These are very good things. But the money saved by using open source does not go primarily to the companies sponsoring its projects. It's money that's saved by developers and users. It's not something you buy, it's something you use.
So Warren Buffett is right to say he's staying out of this game. It's designed to have the public take out the big hitters at prices that will justify the incredible valuations the big hitters claimed to their big clients. If there is real value here, it will be proven, over time, and there will be plenty of time to find that value, evaluate it, and buy into it after the dust settles.
At much lower prices.
As I have written before you can trade this issue for the initial pop, because that's being engineered by the brokers. But if you chase that pop on the open market, or if you think Facebook is an "investment" at these artificial levels, I think you're making a big mistake.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.