Tuesday, December 18, 2012
Never been a fan of Facebook in many ways. From the point of it to an investment standpoint, I JDGI (just don't get it) as they say in text speak. I was never one for personal sharing in the most intimate of arenas and doing so to strangers whom I would never meet is even more of stretch.
But I have seen this before. I was part of the early days of the AOL chatrooms, then message boards, by the time Friendster and MySpace came along I simply did not care. By then I had a lot of "too's" as in too old, too busy, too weird, too whatever.
But what I also found for myself (and clearly I mean me as if you do not spell this out clearly and completely many think you are speaking of and for them, again that must be the social media "we" or group think that seems to revolve around the ## and "like") I simply did not see the profit margins or long term fascination of what Facebook is or should be. I did see that the 28 year old "wunderkind" was smart enough, however, to hire a well connected figure in Sheryl Sandberg. As Google is now learning as did Microsoft, its who you know and how well you work the powers that be that makes a company not actually a business model.
Much is made of small business but if we small businesses had less plans and more connections we would be less smaller that is for sure.
And over the last few days the bloom off the whole social media dot bomb version 2.0 is coming to an ugly head. First the investigation into Facebook and its IPO which has begun and the deal the wunderkind supposedly made with the founder of Instagram in a behind closed doors meeting regarding Facebook's purchase of Instagram for a billion dollars. Why does this sound more and more like an Austin Power's movie?
But like the other members in this boys club of billionaires more on the news of two hedge fund traders being found guilty of insider trading. Ironically or coincidentally also former staff/protege of the now well known but not charged with anything, Steven Cohen of SAC Capital Advisors. Well at least its someone going to jail or not but at this point I'll take anything over the absurd "fines" which to them is akin to a parking ticket.
The duplicity, the fraud, the corruption, the cronyism are all part of our current economic climate. We have no lines between those who actually make the laws and break the laws, they are all interconnected in a web that makes the Spider Woman's seem quite tame.
Before Facebook Deal, Instagram’s Talks With Twitter
By WILLIAM ALDEN
Facebook’s deal to buy Instagram for $1 billion stunned Wall Street and Silicon Valley when it was announced in April. But executives at Twitter had an additional reason to be surprised. Instagram’s founders “held several meetings as late as March with top Twitter executives,” The New York Times’s Nick Bilton reports. “The sides had verbally agreed weeks earlier on a price for Instagram of $525 million in cash and Twitter shares,” Mr. Bilton reports, citing people on both sides of the talks, who requested anonymity because the talks were private and because they were concerned about legal repercussions.
That would appear to contradict statements that Instagram’s chief executive, Kevin Systrom, made under oath, according to Mr. Bilton. Mr. Systrom testified in August at a hearing of the California Corporations Department that his company “never received any offers” at the time of the negotiations with Facebook. Instagram, he said, “talked to other parties, but never received any formal offers from anybody else.”
But when the deal was announced, Twitter executives were “shocked that they had not been given an opportunity to present a counteroffer,” Mr. Bilton reports. The people familiar with the negotiations “said Twitter was prepared to make higher offers.” The Facebook deal closed at $735 million in early September, after Facebook’s stock tumbled. Mr. Bilton writes: “It is possible investors would have been better off selling in an open auction, to Twitter or even to Google or Microsoft.”
It’s not yet clear how Instagram might make money, but some of its users have built businesses that piggyback on the photo-sharing service, The New York Times reports.
Massachusetts Fines Morgan Stanley Over Facebook I.P.O.
By SUSANNE CRAIG and BEN PROTESS
Almost as soon as Facebook went public on May 18, questions arose and problems showed up with the trading of its shares.10:48 a.m. | Updated Morgan Stanley is paying for its role in the troubled stock market debut of Facebook.
On Monday, Massachusetts’s top financial authority fined the bank $5 million for violating securities laws, the first major regulatory action tied to Facebook’s initial public stock offering.
William F. Galvin, the secretary of the commonwealth of Massachusetts, accused the bank of improperly influencing the stock offering process. The regulator’s consent order asserts that a senior Morgan Stanley banker coached Facebook on how to share information with stock analysts who cover the social media company, a potential violation of a landmark legal settlement with Wall Street. While the banker never contacted the analysts directly, his actions, Mr. Galvin said, put ordinary investors at a disadvantage because they lacked access to the same research.
The broader message here is we are going to use any means possible to enforce the strict code in place about giving out information,” Mr. Galvin said in an interview. “We want to get the message across that if Wall Street wants to get confidence back, they can’t disadvantage Main Street.”
The consent order did not name the Morgan Stanley banker, referring to him as a “senior investment banker.” But information in the regulator’s order indicated that it was Michael Grimes, one of the nation’s most influential technology bankers.
“Morgan Stanley is committed to robust compliance with both the letter and the spirit of all applicable regulations and laws,” a Morgan Stanley spokeswoman, Mary Claire Delaney, said. Morgan Stanley, in settling the case, neither admitted nor denied guilt.
Mr. Grimes, through Ms. Delaney, declined to comment. Although the banker was referred to in the order, Mr. Grimes has not been personally accused of any wrongdoing.
The fine is a small dent in the firm’s overall profit from the Facebook public offering. Morgan Stanley received approximately $68 million in underwriting fees for the IPO, according to data provider Thomson Reuters.
Still, the costs associated with the botched I.P.O. are rising. In addition to Mr. Galvin’s fine, the firm agreed to compensate some customers who overpaid when they bought Facebook shares because of a technical glitch at the Nasdaq.
The Facebook public offering was one of the most highly anticipated debuts of the last decade. In the run-up to the offering, investor interest was robust, prompting the company to increase the size of the offering and raise the share price to $38.
But the I.P.O. quickly turned into a debacle. The first day of trading was plagued with problems. The shares quickly fell below their offering price. The stock closed on Monday at $26.75.
A Massachusetts regulator alleged that Michael Grimes, a banker at Morgan Stanley, coached Facebook on how to share information with analysts.Since the offering, Mr. Galvin and other regulators have opened wide-ranging investigations into Facebook and the banks that handled its debut. The continuing inquiries by the Securities and Exchange Commission and the Financial Industry Regulatory Authority are examining how the banks disseminated nonpublic information to big investors — and whether it conflicted with Facebook’s public disclosures.
Regulators are also looking into Nasdaq, the exchange where Facebook trades. They are questioning whether the exchange failed to properly test its trading systems, which faltered during the stock offering.
The Massachusetts regulator is focused on Morgan Stanley’s communications with analysts.
Shortly before the Facebook offering, analysts at several banks lowered their growth estimates for the social network. The move came after Facebook issued an amended prospectus, detailing a potential slowdown in revenue.
A Facebook executive, whose name was not given in the order but who was referred to as the treasurer, also reached out to analysts. Mr. Galvin’s order asserted that the executive, in private conversations with analysts, had provided additional information on the revenue. The order indicated that Mr. Grimes was personally involved in the decision to file the new prospectus and to have Facebook communicate with analysts.
“Morgan Stanley’s senior investment banker did everything but make the phone calls himself,” the Massachusetts regulator said in a statement, referring to Mr. Grimes. “He not only rehearsed with Facebook’s treasurer who placed the calls to the research analysts, but he also drafted the majority of the script Facebook’s treasurer utilized.”
Just 12 minutes after filing the amended prospectus with regulators on May 9, the Facebook treasurer phoned Wall Street research analysts from her hotel, according to the order. She had a 15-minute conversation with Morgan Stanley analysts, and then spoke with JPMorgan Chase and other banks.
The calls provided the analysts with additional information that did not appear in the amended prospectus, the order said. The conversations, for example, included “quantitative information regarding Facebook’s” second-quarter 2012 projections.
This behavior, Mr. Galvin said, crossed the line, violating the regulatory settlement on stock research that Morgan Stanley and other companies signed in 2003. The agreement limits the communication between bankers and research analysts and bans companies from influencing stock reports to try to bolster banking operations.
The Morgan Stanley case falls into a curious gray area.
Bankers spend months preparing companies to go public, a role that includes providing guidance on research analysts. In this instance, Mr. Grimes did not personally place the calls, which would have been a clear violation of securities laws.
In his testimony before the Massachusetts regulator’s staff, Mr. Grimes indicated that the bank had pushed for Facebook to file publicly an amended prospectus to avoid “the appearance” that the company was sharing information with a select group of clients rather than broadly with investors. Mr. Grimes, the order noted, consulted with Morgan Stanley and Facebook lawyers. Ultimately, Facebook’s chief financial officer, David A. Ebersman, e-mailed the company’s board to say that the new filing would “help us to continue to deliver accurate” information without “someone claiming we are providing any selective disclosure.”
Mr. Grimes, in testimony with the regulator, further defended his role. While the Facebook treasurer was making the calls, he noted that “I was far down the hall so I wouldn’t hear anything.”
Even so, Mr. Grimes, according to the consent order, e-mailed Mr. Ebersman to say that the Facebook treasurer “was a champ in the hotel tonight,” after the treasurer wrapped up the calls.