The Facebook Affect

26 May

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af·fect/əˈfekt/

Verb:    

1.  Have an effect on; make a difference to: “the dampness began to affect my health”.

2.  Pretend to have or feel (something): “as usual I affected a supreme unconcern”.

Noun:  

1.  Emotion or desire, esp. as influencing behavior or action.

Synonyms:         

1.  verb.  touch – influence – pretend

2.  noun.  emotion – affection

So despite the excesses that led to the 2008-2009 financial crisis, we have seen a number of high profile (and high dollar value) financial “events” on Wall Street this past year:

  • In late 2011 MF Global filed for bankruptcy after admitting it “misplaced” $1.6B in investors’ money.  Chief Executive Jon Corzine received $8M in compensation the same year.
  • Earlier this month, JPMorgan Chase announced a surprise $2B trading loss on credit derivatives trading, which chief executive Jamie Dimon blamed on “errors, sloppiness and bad judgment” and warned “could get worse”.  Dimon received $23.1M in compensation in 2011, an 11 percent increase from the previous year.
  • And most recently, the much anticipated Facebook IPO fizzles as 101 million shares of the company (valued at $104B) are offered at $38 a share on May 18, 2012.  A week later the stock closes down 16% at $31.91 amid speculation of improper handling of the IPO by Morgan Stanley.  CEO Mark Zuckerberg sells 30.2M shares, making a total (before taxes) of $1.13B.

Let’s explore this latest event a little closer as the IPO was a very public event and yet so many investors still got taken in by the hype…

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