Thursday, May 17, 2012

The Facebook IPO - A Billionaires Delight and Forbearer of the Next Internet Stock Collapse


The culmination of greed in America

Tomorrow the boys of Facebook become billionaires as they cash out just before millions of new stockholders are left holding another Internet stock that lost half it's value.

Make no mistake, the billions to be made over a 48 hour period will be the last profits from the Internet for years to come because there is no business model for pure and simple greed.  This IPO and every other Internet company surviving on revenue from Internet advertising will crash because the truth slipped out of the bag too early.

Yes, the speculators who control the IPO and have purchased all the offering before the public even had access to it, will simply let the value increase since the IPO was over subscribed and that means fewer shares are available for purchase.  In a day or two they will sell into the market, take their billions of cash and walk away.

GM created a huge potential problem for the IPO when it announced just a couple of days before the IPO release that it was stopping all Internet advertising on Facebook and everyone else because after spending billions of dollars on Internet ads over the past few years because the ads have no impact on consumers.

For years the Coltons Point Times has warned of the foundation of quicksand when it comes to valuing Internet stocks and advertising revenues.  In fact a year before the last bust in 2000 we published a column outlining why the market was about to collapse.

For those who don't remember, it has now been twelve years since the dot com bubble began to seriously deflate.  The financial climax had its high water mark on March 10, 2000 when the NASDAQ peaked at 5132.52.

The subsequent stock market crash caused the loss of $5 trillion in the market value of companies from March 2000 to October 2002, and those parts of the world which were the epicenters of the dot com boom, such as the San Francisco Bay Area, were plunged into a financial nuclear winter.

More than a decade later we still haven't learned.  Facebook is going public with over 97% of their revenue from Internet ads, ads General Motors, the largest car company in the world, says are worthless.  American's and foreigners driven by greed will purchase the stock, not from Facebook but from the financial institutions who already bought  stock before the people had a chance.

Now that's fair President Obama, our first president to embrace the Internet speculators as economic wonders not to mention huge financial contributors to the President's reelection campaign.  You don't suppose Obama has some of that Facebook stock do you?

There is no financial basis to say Facebook is bigger than Exxon, Proctor & Gamble or GM when the sole basis for revenue is advertising which recent polls indicate 83% of Facebook users never click on.  The other 17% say they occasionally click on one if it is of interest.

Don't be surprised if another five trillion dollars is lost and that most of it comes from Internet stocks, or should I say stockholders.  Of course the Internet executives will cash out starting tomorrow leaving you holding the bag.

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