Facebook IPO, The Ultimate Ponzi Scheme?
Are retail traders excited for the Facebook IPO? Or do they secretly fear it?
If you listen to the mainstream media, you'll be under the impression that Facebook's (NASDAQ: FB) initial public offering is slated to become the biggest of all time. Never mind the disappointing debut of Zynga (NASDAQ: ZNGA), the decline of Groupon (NASDAQ: GRPN), or the rise and fall (and rise again) of LinkedIn (NYSE: LNKD). Those don't matter! They aren't worth paying attention to! This is Facebook we're talking about, here. Facebook is the all-powerful stock that will change the world!
Or will it? Francis Gaskins, a so-called "IPO watcher" from IPOPremium.com, told Yahoo! that we shouldn't buy into the hype of the Facebook roadshow.
"There's no growth there right now based on the numbers. They're basically trying to reinvent themselves, saying 'trust me' they can monetize their 901 million users," Gaskins told Yahoo! "But they don't really have a track record of success with their new endeavors."
Okay, fine, Gaskins is one of many commentators who are skeptical of an enormously large company that has yet to prove it can monetize its users. So what else is new?
Well, if you scroll down to the comments section, you'll find a few interesting tidbits, like this:
"Facecrook pimps your personal data for profit."
"Another internet fad ponzi scheme. The first ones in will be the first ones out. The rest of you will lose your shirts."
"What did P.T. Barnum say about Americans? 'There's a sucker born every minute.'"
But let's not overlook this:
"All I want to know is when I can start shorting Facebook."
"Facebook is even a larger distraction than the Yahoo blogs."
I know what you're thinking. "Negative comments are the norm! People like to complain and they love to hate Facebook!"
All true. But negative comments are usually counter balanced with a positive statement or two. However, you won't find much of that here. Just comments like the following, from a guy who simply goes by the name of John:
"Facebook is a diversion for those who live their lives online. The problem is, it makes it easy to become a target of the media and government. I may be just a bit paranoid, but whatever is put on the net will live forever somewhere, can be easily taken out of context and then manipulated for someone else's benefit. I'm not one of those willing to sacrifice my privacy for someone else's gain or benefit."
And this one, from CitizenSane1967:
"Facebook produces NOTHING. They sell advertising, members willingly put their data in the servers for the company to sell and people spend their precious time wasting their life self promoting themselves. The investment banks are putting Lipstick on this Pig ahead of the IPO."
Wow, lipstick on a pig? I haven't heard that reference since the 2008 Presidential Election.
Clearly people are getting upset by Facebook. Is this a realistic representation of the way investors truly feel about the social network? Probably not. I doubt that the average serious investor will waste his or her time ranting in the comments section of a Yahoo! (NASDAQ: YHOO) story. But it could be a sign that Facebook may not be able to persuade the masses. In the short-term, that's okay -- the company doesn't need more than its most loyal followers to produce a record-breaking IPO.
Long-term, however, Facebook is going to need to prove that it does have a sustainable business model for monetizing its users. Otherwise, the "Ponzi Scheme" label that some are applying could begin to catch on.
And when that happens, there's no going back.
Follow me @LouisBedigianBZ
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