Where Are the Retail Investors And Facebook Likes
The US markets have definitely slowed down IPOs. With the recent Facebook debacle I wouldn’t be surprised if there are less IPOs coming to market any time soon. It can been seen as wolf on sheep. The institutional players are considered the wolf and the retail investors are the sheep. Good luck with that slaughter. Many see that they laughed at their IPO as a trick on the American public. Trick-or-treat. Most Americans don’t notice it but this debacle is seen as good thing. It shows how broken the system is. The next up is the crowd funding model that will revolutionize the capital markets and cash flow lending.
It is already seen that the American public doesn’t have any more belief in the financial markets. Since 2008 the volumes in the market have dramatically decreased. We’re talking from 6 to 7 billion shares a day to him easily 1.5 to 2 billion shares a day. Is everybody on a holiday? Not really. Because of the Madoff scandals, market crashes, flash crashes, high regulatory compliance, and accounting scandals, people don’t necessarily have any believe in the US financial markets. They rightfully shouldn’t either. Broker-dealers favor favorite institutional clients with inside information. How are the little people supposed to compete? They don’t, they just leave the marketplace altogether. And that is what is going on the last few years.
The Facebook IPO probably was one of the last favorite IPOs to go to the public and smash them. Because the underwriters and Facebook misled shareholders about revenue projections information was not disperse equally among all participants. Favoritism was led to the institutional clients. Is the playing field level? I doubt it. Because of this blunder, we will see the rise of a new capital market and find venture capital.
This Facebook debacle is actually good because it shows just how broken the US capital markets are. The new frontier of crowd funding will solve a lot of these problems because information will be disbursed openly among all participants. From the very beginning of the crowdfunding to the IPO stage. Information will always be in the open. Which is very ironic because with the current 1933 act, it allows private placements to have very private information among participants. This is almost the exact opposite of what capital markets should be doing when raising capital. Participants need to have equal access to information to make informed decisions.
Because of Facebook the new capital formation is going to have a stronger start. Facebook will always be looked at as a failure to the capital markets even though the institutional shareholders scored big with retail investor footing the Zuckerberg bill.
The belief in the system from Facebook is completely gone. When the elections hit maybe there will be some positiveness because of the jobs act.