Facebook: When the Buyer Did Not Beware

NEW YORK ( TheStreet) -- I've got nothing but love and respect for CNBC and TheStreet's Jim Cramer. He does what the best writers and media personalities do. Cramer prompts you to think, react and reconsider your own convictions.

On Tuesday, I thought, reacted and reconsidered after reading Cramer's latest article on Facebook ( FB), The Disgrace of a Stock Lifetime.

In the article, Cramer lashed out at the Facebook situation:
I don't know about yours, but I have to tell you that the sour taste of the Facebook deal hasn't left my mouth yet.
If you go back just a couple of weeks, we were at a crucial moment in time. The individual investor has been crushed for so long now that it was almost impossible to think about what could bring him back to stocks ...

I could not agree with Cramer more. As with Tiger Woods heading into the US Open coming off of a win at the Memorial, Facebook brought otherwise casual observers and many non-participants into the stock market. It's a shame that things did not turn out better, but you cannot blame anybody but yourself if you got taken by this IPO.

At every turn, the individual investor expects to be spoon-fed or, put aptly, protected from herself.

One of the biggest gripes from Main Street posits that only insiders knew Facebook expects a possible slowdown in revenue due to mobile monetization issues. That's interesting.

Facebook went public on May 18. On the U.S. Securities and Exchange Commission's Web site, check out the page that lists all of Facebook's filing.

Starting with the amended S-1 on April 23, Facebook mentions the word "mobile" roughly 170 times each in five amended S-1s leading up to the IPO. If you search (CTRL-F on a PC) "mobile," you will see that a lion's share of those occurrences mentions clearly and specifically warn of a possible slowdown in revenue as the rapid shift from desktop to mobile outpaces Facebook's ability to place ads in front of its users.

That's public information. Was Facebook supposed to deliver an S-1 to every household in the world via overnight mail? Was Mark Zuckerberg? How about Morgan Stanley ( MS)? Maybe the SEC should have been charged with the task? Of course, large factions of society would have moaned about a "waste of taxpayer money."

Please allow me to digress, but also understand I am not being sarcastic.

That information was public. I would venture that people who follow the stock market on an hourly basis rarely look at SEC filings, listen to conference calls or read more than the headlines the mainstream media hand picks for them. But, yeah, only "insiders" had the knowledge that Facebook might experience mobile monetization problems. Since when was an insider a person with an Internet connection, a brain and an ounce of initiative?

And, of course, when you lose money because you're green, pure as the driven snow, lazy or uninformed, what do you do in the land of self-entitlement? You get bitter and sue somebody's butt!

There's a class action lawsuit out there claiming that Facebook CEO Mark Zuckerberg "knew FB stock was grossly overvalued" and "sold more than $1 billion worth of the social networks stock just before prices started tumbling."

First of all, he sold the stock before it was a public security. Second, have any of the plaintiffs looked into how an IPO functions? Where do they think the shares for the public offering come from? Santa Claus? Do they grow on trees? Does the tooth fairy leave them under Morgan Stanley's pillow on IPO eve? Private investors sell into IPOs. That's how they work for goodness sake.

And, if Zuckerberg decided to unload because of a drag on revenue, he did it on the aforementioned publicly available information.

Assigning Blame

If anybody deserves to be ripped for what happened when Facebook went public, it's Nasdaq.

Unlike the rest of Main Street and large swaths of "investors" looking to make a quick buck, I bought three measly shares of FB shortly after the open on May 18. There was no way I was buying any meaningful number of shares. With the media certain to turn on Facebook, I want as much bad news as possible before I buy. I'm still waiting.

In any event, I bought the token shares simply to be part of the process. I am glad I did. Nasdaq screwed up my order as well. It was pending for about four hours before I received confirmation that it even went through. I got hosed. Had I rubbed the rabbit's foot in the morning and bought a large number of shares, I would have been freaking out. But, I didn't. And that's because I have the required knowledge to be part of the game.

Please do not take that the wrong way. I have made my share of stupid trading and investing mistakes in the past. I have paid dearly for them. I still make them, however, thanks to experience, I no longer pay dearly. Such is the process called life. We learn from our mistakes.

If you got in over your head with Facebook on May 18, you made a mistake. It's likely not the end of the world. Learn from the mistake. If you get some compensation from Nasdaq, take it. You might be entitled to something. I really do not know.

But, I do know that I am at odds with bitterness. It gets you nowhere fast. Familiarize yourself with how things work before you go all-in or even a little bit in. And don't expect somebody to save your soul if you do otherwise.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, the author was long three shares of FB.

If you liked this article you might like

25 of the Most Expensive Private High Schools in the U.S.

25 of the Most Expensive Private High Schools in the U.S.

Google and Facebook Banning Cryptocurrency Ads May Actually Be Good for Bitcoin

Google and Facebook Banning Cryptocurrency Ads May Actually Be Good for Bitcoin



Week in Review: Stocks Tried Really Hard to Rally This Week

Week in Review: Stocks Tried Really Hard to Rally This Week

Cramer: There's More to Tech Than FAANG

Cramer: There's More to Tech Than FAANG