By Dave Goodboy
NEW YORK (TheStreet) -- "They need to get rid of [ founder Mark] Zuckerberg. Facebook (FB) may have a chance if a talented leader is appointed; otherwise it's a no-go. The guy is a master at the start-up, but he needs to turn the reins over to someone else to run the company," exclaimed an under-the-radar Internet insider with whom I recently chatted in South Florida.
His words proved semi-prescient as the heavily anticipated Facebook initial public offering has gone down in history as providing the worst return of any large IPO in the past decade.
The massive $16 billion IPO was fraught with issues from its launch on May 18. A lack of communication at Nasdaq appears to be the initial trigger of the strife, causing the IPO to be delayed. Some investors complained that their orders weren't being filled or they were getting shares at a much higher price than they wanted. The confusion resulted in about $115 million in losses for the four major market-makers in the IPO: Knight Capital Group (KCG), Citigroup's (C) Automated Trading Desk, Citadel Securities and UBS (UBS). The exact steps taken by Nasdaq officials on the IPO's first day are still unclear. However, the losses suffered by investors and the market-makers are very real. This has triggered a rash of shareholder lawsuits against the social media behemoth. Obviously, it wasn't Zuckerberg who caused the initial confusion. But time will tell if he can help solve the problems or if a new leader needs to take over. Either way, it looks like it's going to be a long and revealing road to get to the bottom of exactly what went wrong with the IPO. But one thing is for certain: Facebook's flop pulled down the entire social media sector, potentially setting up a great buying opportunity for savvy investors.
The Facebook of ChinaWhile the lawyers are sorting out Facebook's troubles, otherwise successful social media companies have been knocked down into bargain territory. One of these is Renren (RENN). The so-called Facebook of China nearly doubled in 2012 prior to the Facebook flop. As you can see, shares plunged into the $4 range in sympathy with the Facebook selloff. However, the price appears to have stabilized and may be beginning to climb higher.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV