Monday, June 4, 2012

A Childhood Nightmare

Facebook stock is crumbling around us, and I ask, "was it really a smart investment?"  The truth is many have been hurt by the investment and a simple "I told you so" will not replace the sadness that many people are feeling right now due to the overvalued stock.

One interesting article I read has to do with an 11 year old boy who invested $10,000 in Facebook.  $10,000.  His mother states, "It's really disappointing, because we could have made money on this."  Truth is -- there is not much money being made.  However, many people still think Facebook is a super-valuable commodity that is worth putting money into.  Are you going to bet your family's future on a fad?  Is investing any substantial amount of money worth the huge gamble that is Facebook? 

Here is the story, in case you are interested.  I picked it up from the New York Post online edition (I usually don't read this paper, but was pointed to the story from an acquaintance.)

Facebook billionaire Mark Zuckerberg will not get a friend request from this 11-year-old any time soon.

Fifth-grader Sam Lesser is one of a long line of average-Joe investors who still don’t know if their orders for Facebook shares have been filled — three days after he plunked down $10,000 on the company.

“They are holding my money hostage,” said Lesser, a student at The Town private school who lives on the Upper East Side.

The stock trader’s dreams of owning a small slice of Facebook turned into a nightmare on Friday, when he and his mother found out his order for 300 shares may not have been filled due to Nasdaq computer glitches.

Lesser — who likes to play football and tennis when he’s not playing the stock market — anted up $10,000 by using the profits from the small business he started, called SML Networks.

His company sells bracelets and skateboards, mostly to classmates and neighbors.
“It’s really disappointing, because we could have made money on this,” he said.
He would know.
Lesser owns a stake in Apple — which he bought when he was 5.
He won’t say how much it’s worth.

As for his Facebook trades, Lesser and his mom are still haggling with officials at their local Fidelity Investments.
“We’ve spoken with three senior traders and nobody seems to have any answers at Fidelity,” said Lesser’s mom.
“We feel misguided and misled,” she said, adding that some of her son’s potential profits were going to go to Lance Armstrong’s LiveStrong charity.
Average investors, like the Lessers, are fuming as they wait to hear whether their orders will ever be completed.
“We continue to deal with the aftermath of Friday’s [trading glitches],” said Fidelity spokesman Steve Austin.

Fidelity, along with a number of retail firms like Charles Schwab, were being flooded with orders for Facebook during its IPO, Austin said.

The firms are waiting to get a response from Nasdaq, and only then will they be able to tell customers if their orders were canceled or completed.

Nasdaq might have to fork over as much as $150 million to make big institutional investors whole due to similar trading issues, sources said.
The main culprit for the computer glitches is the long backlog of cancel orders that gummed up Nasdaq’s system right before the IPO began.

A staggering 581 million shares of Facebook traded hands on Friday, and Nasdaq CEO Bob Greifeld has said he is “embarrassed” about the glitches.  Source: New York Post
As of the close of the markets today, Facebook is valued at $25.869.  This is quite a drop since the last post I mentioned the value of Facebook being over $30.  I have a feeling that Facebook will settle at a lower price and hover there.  It was a very poor investment from the get go, and that can not be blamed on any computer malfunction.  The truth was, Facebook was HUGELY OVERVALUED and not worth anything near what people speculated.  There was not 'vast sums of money to be made' from investing in the site, and in time more people are going to see that.  Until then, I hope your future investments turn out better, and that your time will not be spent in front of the computer on Facebook.  

1 comment:

  1. At the time when people invested in Facebook, things were in a good state. But slowly and gradually things changed. Questioning on this is a bit futile as this market is unpredictable.