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Facebook: Retail Investors The Losers As Institutions Smile

|Includes: Facebook (FB)

Facebook Inc (NASDAQ:FB) is trading at $33.84, -4.39 (-11.49%). This is a classic kill the retail investor move IPO. This stock offering had the biggest retail investor participation in years if not ever. As the Facebook IPO was pumped, more and more regular investors clamored for shares. The institutions gladly obliged. The IPO opened and collapsed. As it fell, the retail investor panicked and started dumping shares at a 10% plus discount to the IPO price. This is what we have seen today. As it falls, institutions are smiling and accumulating the shares. The downside of the stock is $30.00 while the upside is $45.00. Essentially, the small investor is going to lose once again.

The small investor always loses because they use emotion to rule their trading. Institutions know this and use it to their advantage at every turn. The Facebook IPO was a classic example of the transfer of wealth. At current levels, it is my guess that Facebook heads back up within a couple weeks, back to the $38-$40 level.

Gareth Soloway

Chief Market Strategist