What the Facebook Fiasco Tells Us About Our Rigged Stock Market
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Many of the people who lost money are experienced folks who are looking to make a short-term profit when, as they hope, the price of the stock goes up in the early days after the IPO, partly due to the frenzy. Others are just ordinary people who asked their brokers to get them in on the game when they read about all the excitement in the paper. They may have thought of holding the stock over the long-term. Unfortunately at this point, everybody except that privileged inner circle is feeling a bit like the poor souls at the blackjack table – angry that their money has been lost in a game they were never meant to win. In essence, the entire IPO show is little more than what Lazonick calls an “organized gambling event” where the insiders with the privileged information are usually the ones who come out ahead.
Lots of people are now asking if Facebook’s much-touted prospective earnings justified the IPO price. But guess what? Nobody has a clue what those earnings will be beyond projected advertising revenues for the next six months. And the short-term speculator type investors don’t really care anyway, because they’re just trying to make a windfall by dumping the stock for a quick capital gain.
Facebook is scrambling to place the blame for the fumbled IPO on technical glitches at NASDAQ, but it seems that the public is not buying what they’re selling on that one. No, it looks like Zuckerberg and the underwriters were just greedy, trying to hustle as much money as possible, the public be damned.
Last weekend, Zuckerberg demonstrated his appreciation of the finer points of greed with a surprise wedding -- right after the IPO -- to his girlfriend of 10 years, Priscilla Chan. We are told the timing was a mere coincidence. Nobody is really buying that one, either. California is a community property state, meaning that everything earned during the marriage belongs to both partners by law, but everything earned before the wedding is kept by the individuals. So if the pair ever decide to divorce, Chan will not be walking away with a penny of Mark’s pre-wedding billions.
Trust is a big part of what’s supposed to make capitalism work. But Americans are increasingly pulling money out of the stock market because they rightfully do not trust it. A 2011 Gallup poll showed the lowest percentage of ownership in the stock market since 1999 (54 percent).
In January 2012, Gallup found that Americans are more worried about their financial future at any time since 1991. Where, they are wondering, should they put their money? In a mattress, perhaps? And they are going to need money from somewhere, because increasingly even the Democrats have bought the baloney about the need to cut Social Security (which is in perfectly fine fiscal shape). The banks will not stop until they have gotten us to put our retirement money in accounts on which they can charge fees. Make no mistake: this is the foundation of every line about the need to “fix” Social Security by increasing the retirement age, making cost-of-living adjustments, etc. It’s all about the banks wanting that money.
But back to the big lesson here: without transparency, without trust and without accountability, the stock market will continue to widen the increasing chasm between the uberrich and everybody else. As some quaintly put it, we’re all getting Zuckered.
Lynn Parramore is an AlterNet contributing editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' Follow her on Twitter @LynnParramore.