I have been wondering as we watch the Facebook stock drop a little over $9.00 in one week this last month whether anyone actually ever bothered to read the IPO prospectus that accompanied the stock.  If anyone read it and still purchased stock in this company, they know absolutely NOTHING about investing or had way too much confidence in the kid from Harvard.

Let’s take a look here and see…

First and foremost when the IPO took place, the company was already peaking in terms of growth.  At the same time, the IPO went for an astounding 60x what their projected earnings are for next year.  In comparison to other tech stocks, this is a HUGE rate.  Google’s IPO went for less than 20x their target earnings.  On top of that, Mark Zuckerberg has far too much control over the company.  He openly admits that he cares very little about short term profit, yet loves the billions of dollars in cash that the IPO has provided him.  He cares VERY little about the astounding losses to stockholder’s portfolios he has caused.  HE runs the company like it is still his little social website that he plays around with while he has nothing else to do.  If that is the case, then why go public?  Why do everything in your power to attract stockholders in this HUGE IPO if you have no intention on being concerned about almost 60% loss in stock value?

Here is a good hint on what Zuckerberg has planned for your investment money over the next 12 months… Facebook insiders have sold over 2 BILLION SHARES of Facebook stock.  If his own people are selling Facebook stocks as fast as they can, what do you think they have in store for your money??  He describes his company in terms of decades not months.  He also owns 57% of the company, so all of your insistent whining will not get you anywhere because he has already told everyone that he does not care to listen.  If he has anything going for himself, it is a hard shell that no one is going to break open.  He is steadfast in his belief that no one is going to tell him how to run the company nor is anyone going to make him step down.  I can safely say one thing however… there is little chance that he is going to sell any of his stock and lose control of the 57% stake in this company.  The moment he does he knows that he is going to be fired.  In his open letter to the public he has openly stated that he built this company for the users and not the stockholders. He is adamant about the idea that no one and I mean no one is going to tell him what to do.

In fact, Zuckerberg is so set in his position about his company that he doesn’t even cave to law enforcement or courts.  Do you have children?  What happens when your 14 year old’s picture in her bra and panties gets posted to Facebook? NOT A DAMN THING.  Facebook’s Terms & Conditions explicitly state that a 13 year old on Facebook is considered an adult and you, as a parent, have no say about how they control their account!  Obtain a court order to have the profile taken down?  Sorry, that doesn’t work either.  Try calling Facebook and asking them where to serve a court order.  They will tell you where to stick it. I’ve tried.  It’s amazing how egocentric this guy is.  He calls this progress and social growth.  Mark Zuckerberg makes the rules about your children, not you.  He has lawsuits in so many states that I wonder if they can even be counted.  Investors are filing them faster then his legal team can respond to them and as he settles one, ten more pop up.  Is this really all worth it?  Think about this for a moment.  Most companies don’t have problems like this.  So why does Facebook?  Generally conditions like this only exist in a setting where there are irresponsible leaders.

When all is said and done, let’s remember a few lines from his open letter to the public, “We don’t wake up in the morning with the primary goal of making money… This is how we think about our IPO as well.    He wonders why people are filing lawsuits against him?  I actually used to think this guy was smart.  Now, I just think he is arrogant and irresponsible.  He has no problem taking the public’s money for himself because as he puts it, he calls his management style “The Hacker’s Way“, as he explains it.  The Hacker’s Way?  Really?

His mantra seems pretty simple.  He says, “We have a saying: “Move fast and break things.”  So as you are losing your life savings on his IPO as many people seemingly have, Mark Zuckerberg will be planning for the future.  If you are a 50 year old making the mistake of investing in his IPO, look at it this way, at least your grandchildren will inherit stocks that will eventually be worth something?  Right now they are trading under $19 a share.  From an entirely investment perspective, the worst that Facebook should feasibly drop to is about $4 to $5 a share if you consider their $10.2 billion in cash and marketable securities.  So at least the worst that is going to happen is a 90% loss in your money.  You stand a better chance financially playing craps in Las Vegas.