Clownishness, much like beauty, stands in the eye of the beholder. So let's gather together to behold a clownish trade. Granted: playing Monday Morning quarterback to lame stock trades is a bit selective, even venal. But in the end, you learn from analyzing mistakes. Plus, what's more fun than making fun of missteps and pratfalls? With all that said, welcome to the next installment of The Clownish Trade of the Day …
From lambs on, the prospect of silence is terrifying.
Enter Facebook (FB), saying nearly nothing.
When it comes to lines of communication, Facebook's Initial Public Offering road show was more dog than pony. They deigned to take only a smattering of questions from potential shareholders they obviously view as the great unwashed, unworthy of answers.
Since issues of open and forthright communication already precede Mark Zuckerberg, who boasts majority, 57 percent control of the shares outstanding and is no Chatty Cathy, you'd figure Facebook would take the occasion to put these concerns to bed. Instead, they lighted the bed on fire. In New York, investors were able to ask a grand total of five questions.
To say that is atypical is an understatement.
Moreover, here's what we know: a public company has legal and ethical obligations to communicate. Around the nation, too, shareholders are exerting more and more influence. You need to look no further than Citigroup (C), where a compensation package was voted down.
Some are even calling this the Shareholder Spring, referencing last year's move toward freedom in the Arab world. How will Facebook look in comparison? That question, at least, probably answers itself.
When companies opt for the cone of silence, it rarely ends well. Even great companies -- Apple (AAPL) comes immediately to mind -- run into buzz-saws when they fail to communicate in an open and honest fashion. Witness the disruption and confusion caused by Apple's long-held silence over Steve Jobs' health.
That is not to say Facebook is a categorically bad investment. Whether Facebook will be the next Google (GOOG), Amazon (AMZN), Cisco (CSCO) or eBay (EBAY) or any of the hundreds of firms that were hot at the outset and fell into stock market obscurity is a subject for another article.
All we're doing here is saying: tread carefully. When a public company barely talks publicly, it tends, even in the best-case scenarios, to result in serious tumult somewhere along the line.
Sometimes clowns are funny. Sometimes they are scary. And a public company not talking is one scary clown.
