Facebook Fakeout, Failure, Fiasco

Two days after the much hyped “Biggest IPO In History”, FB’s closer to the Titantic than being the next Google. Oh the humanity! Special thanks to Beating The Index, KrantCents, Tossing It Out, The College Investor, and Watson Inc. for trying to talk some sense into me. Sadly, one person overrode their logical and expert advice. My mom. I’m not blaming. I’m trying to piece together what went so wrong. An 18% beatdown in two days can bring extra perspective and clarity so I want to really drive the lessons home. My name is Buck Inspire and I bought FB during their IPO.

No Sure Things

For months my mom and I have been shooting the breeze about Facebook’s initial public offering. She’s calm most of the time, but there was a certain giddiness and mania I haven’t seen before. My stock track record is nothing to brag about, but unfortunately, my parent’s are even worse as they tortured themselves with countless missed opportunities, wouldas, shouldas and couldas. In a way, I so wanted my mom to enjoy a home run that my own disciplines went out the window and I got emotionally caught up in the hype with very disastrous results, short term.

Sell Stop

For years I used William O’Neil’s 8% sell rule. It’s kept me out of trouble for the most part, but also sold me too early from big gains because I had no rebuy discipline. Sadly, during the hoopla, I forgot to add my normal 8% sell stop rule to keep me out of harm’s way.

Stock Discount Trouble

Early Friday morning, I got a bulletin saying I could enter limit orders a few hours before market orders. I entered a limit order to get some FB at $50. Later in the day, the price was falling from $41 back to the IPO price of $38. First thing in my mind, sale! We now know the real message was stay away as people were running for the exits. It’s getting worse with all the finger pointing and blame being tossed around. 20/20 hindsight, where were you when I needed you?

Market Movers Trump Grandmas

I convinced myself that if grandmas and grandpas were excited, then there would be a big demand from Joe Public Investor. Wake up! Market Movers we now know were sour on the stock. Just like rock beats scissors, market movers crush grandparents.

Final Thoughts

I wanted to be part of history. Big fat congratulations to me as I am now part of one of the worst IPO’s in history. When emotions override logic and discipline, bad things happen. Guess I now can take the opportunity to commiserate with my mom, regain my discipline, and improve with my next trade. Finally, as more ugly details surface from the botched IPO, due diligence is still king even if the company is too big to fail and has over 900 million friends.

Stay Inspired!
Buck

16 thoughts on “Facebook Fakeout, Failure, Fiasco”

  1. Well, what’s done is done. Who knows, you may yet have the last laugh on your FB investment. (Though it’ll probably take a while. :-) ) I saw a guy on CNBC just yesterday arguing FB has tremendous potential and the IPO price was justified.

  2. If there is any comfort in this, you are not alone. Many people bought into the hype. One way to avoid the craziness of the day or any day is to have a plan. If you stick to your plan, you can avoid a lot of mistakes.

  3. I bought some in pre-market yesterday at 36.50 thinking Morgan Stanley was going to defend $38.00 again once the RTH market opened. A soon as it became clear they weren’t I got out – about $35.20 I think. I would have shorted it at that point if feasible, but there wasn’t any borrow yet.

  4. Thanks for the nod, but I don’t have any idea what’s really going on, I only have suspicions. They say buy stocks in companies you really like and believe in. Facebook is okay, but I’m not overly thrilled about it. Mostly there’s not much there that hasn’t been seen in some form somewhere else or might be done better in the future.

    But the overweight lady hasn’t started singing yet and FB may still pull through. Perhaps investors are being a bit impatient. If Zuckerburg and crew do things right, they might still have a big producer on their hands. We’ll have to see.

    Hope the story turns out well for you.

    Lee
    An A to Z Co-Host
    Tossing It Out

    1. You’re welcome Lee! We’ll see if they can turn it around. I never dreamed FB’s IPO would have turned out like this. Thanks for the well wishes. I’m gonna need it.

  5. Picking stocks involves mistakes, no one is perfect. What counts now is to review your investment case and take the appropriate decision following the results of your review!

    The market is crazy, no telling where any stock is going these days…

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