If you were one of the many small investors clamoring to get a piece of the Facebook (NASDAQ:FB) IPO, then, I am sorry to say this, you deserve to lose your money. Twelve years after a Wall Street promoted, media hyped tech bubble ravished the portfolios of millions of investors and five years after a Wall Street promoted, media hyped housing bubble caused "The Great Recession," you would think that already skeptical investors, weary of Wall Street and financial markets, would see the Wall Street promoted, media hyped FB IPO and turn the other way. Granted, it was difficult to turn away considering that the IPO was mentioned on all financial and non-financial media outlets from here to Timbuktu. However, I do recall similar coverage of the 2000 tech bubble as well as numerous stories on how housing would make all of us rich so maybe it was best just to turn off the T.V. (or computer, radio, etc.)
When you stick your hand in a flame for the first time, it gets burned. Many people would stop at that point and make a mental note that fire=pain. Some will stick their hand in a second time, just to double check that fire=pain. However, there are those among us who continually stick our hands into fire and wonder, gee why is my hand in so much pain? Now maybe this isn't the best analogy (in fact I am sure it isn't) but why do so many people continually stick their financial hands into a financial fire?
When has reality EVER matched the hype of anything? I don't care where you look in this world, hype always leads to disappointment. It doesn't matter if it is in finance, politics, sports (great examples here!), etc, you name the hype and there is almost certain to be disappointment that followed.
Now I don't know much about FB, I don't care much about FB and I will never purchase FB stock so it would be very difficult to write an in depth article about finances and valuation, etc. The only things I do know about FB is that: a) it has a huge user base (800 million people I believe) which is a good thing; b) I have a Facebook page and have never once clicked on the ads [I can't be the only one and maybe a reason why General Motors (NYSE:GM) announced it will suspend FB advertising]; c) it has many headwinds simply because of the nature of the tech industry; and d) it came to market at a ridiculous valuation considering the revenue and profit figures that I know about.
The inspiration for this article (or better yet, rant) was an article on The Huffington Post I came across titled "Facebook Stock Collapse Contributes To Mistrust Of Wall Street" by Mark Gongloff. Now, I don't have any problem with the article or Mr. Gongloff as he is just writing about the entire situation surrounding FB. However, it made me laugh (especially considering I haven't been following the Facebook IPO story at all) that anyone is surprised that a big, over-hyped tech IPO has benefited insiders to the detriment of the small investors who wanted in on the action as well as the mess surrounding the whole IPO. Zuckerberg, Bono, the graffiti artist guy and everyone else who were on the inside are now rich (or richer). Why is anyone surprised by this? In addition, if someone didn't trust Wall Street before, was the massively hyped, ridiculously valued FB IPO suppose to fix that mistrust?
Hopefully, if there is one lesson that people can learn from Facebook and use, not just for investing, but in everyday life it is this: beware of hype! It can be hazardous to your wealth (and health).
P.S. If you are still interested in investing in Facebook, the only advice I can give you is to at least wait till the dust settles from the hype and ensuing IPO disaster, then perform your analysis and make a rational decision. If Facebook lives up to the potential that many believe it has, there will be plenty of time (and chances) to make money.