The Stock Market Racket
May 23, 2012 by Bob Livingston
The stock market is a racket, and Wall Street is an organized crime syndicate. Last week’s initial public offering of Facebook demonstrates exactly how the deck is stacked against individuals for the benefit of the bankster mob.
The stock was priced at $38, which valued a company providing a free service at $104 billion. It made instant billionaires and millionaires out of Facebook’s founders and a number of employees. The stock was offered to large investors on Thursday afternoon. Before trading started on the open market mid-morning Friday, insiders were already selling their stock, and large investors were already planning how to make out like bandits based on information they had that others weren’t privy to.
There was a reason for it. The forecasts for the stock’s performance were cut in the hours before the release. But only select large investors and funds were informed of the cut by the IPO’s main underwriter, Morgan Stanley. Secondary underwriters JPMorgan Chase and Goldman Sachs also revised their estimates downward.
Investment firms that received advance notice of the lowered expectations called the last-minute change highly unusual. Scott Sweet, senior managing partner at the research firm IPO Boutique, said one of his major hedge fund clients learned of the revised forecast, still bought the issue, then flipped it and went short on the opening day.
The stock jumped to $45 before its plunge began. Yesterday, it closed at $31.12.
Large investors like Sweet’s hedge fund client can make a major difference in the path the stock takes and can make money by driving the stock price one way or the other. Meanwhile, individual investors are left holding the (empty) bag.
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