Facebook IPO Debacle: Where Was The Media?


Facebook IPO Debacle: Where Was The Media?

Facebook Inc (NASDAQ:FB)’s stock has been on a rebound lately. However, retail investors are still underwater. The stock’s IPO officially was priced at $38 a share, but most small investors were unable to purchase stock below $42 a share. Additionally, the stock reached a low of $25.52 just a few weeks ago. Investors who bought at the peak and sold at the bottom were left with a 54% loss in a matter of weeks.

Accusations have been thrown at everyone involved. The Nadaq OMX Group, Inc. (NASDAQ:NDAQ), Facebook, CEO Mark Zuckerberg, the investors themselves, the underwriters such as Morgan Stanley (NYSE:MS), and many others. The lawyers will likely make a nice amount of money.

Corsair Capital Profits From Goldman Sachs’ SPACs [Exclusive]

Cubic Corporation Chris Hohn favorite hedge fundsCorsair Capital, the event-driven long-short equity hedge fund, gained 6.6% net during the second quarter, bringing its year-to-date performance to 17.5%. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter letter to investors, a copy of which of ValueWalk has been able to review, the largest contributor Read More

But what about the media? To be fair, we have devoted a great deal of attention to Facebook. But we wrote very little before the IPO, merely warning investors of the hype around the stock.

The media were all over the Facebook IPO for many months before it even started. NY Daily News  has an interesting article on the topic. Morgan Stanley is blaming CNBC for their part in covering the Facebook IPO. According to the article, CNBC senior vice president and editor in chief Nik Deogun “is under fire.”

Morgan Stanley is enraged that CNBC continues to blame the investment bank while CNBC “promoted this IPO worse than anybody.”

Other complaints from Morgan Stanley (NYSE:MS) about CNBC:

During Facebook’s pre-ipo road show, MS claims that CNBC treated Facebook CEO Mark Zuckerberg’s entrance like “the President’s State of the Union Address.”

Finally, CNBC’s “Mad Money” host Jim Cramer touted the stock on several occasions. He said investors should buy the stock at $50 pre-IPO if they got a chance.

On May 17th the day before the IPO, Cramer stated “If you can get in on the actual IPO, then I think Facebook is a no-brainer.”

Then on May 22nd, as the stock tanked Cramer stated Look, it’s all in the wrong hands,” and the company didn’t do a good road show.”

Cramer’s viewership has tanked, down 14% according to Nielsen ratings.

CNBC’s spokesman said that the network did a balanced job on the coverage of the IPO.

He also added in a very interesting statement about Nielsen ratings:

“The mere fact that you would use Nielsen, which does not measure affluent homes and out-of-home viewing–like trading floors, C suites, office buildings, restaurants, country clubs, fitness centers and hotels — to try to quantify CNBC is another indication of how poorly informed you are.”

According to sources familiar with the matter, all advertisers use Nielsen to evaluate a television network. Furthermore, “Nielsen is the currency by which advertisers buy time on CNBC which equates to 50% of their business model.”

The source also stated “They have been using that excuse for decades.”

Instead of blaming Nielsen yet again, they might want to focus on the real problem that is causing the ratings to decline. One suggestion would be to give Jim Cramer some Xanax before Mad Money airs.

This sounds like the bad weather excuse. CEOs blame poor sales on bad weather all the time. However, no CEO, to our knowledge has ever stated that good sales numbers were due to better than expected weather.

CNBC is not the only network that deserves blame. All the big media outlets were obsessed with Facebook coverage.

But the Nielsen excuse is elementary at best.

There is a good chance that Cramer will recover, and his Nielsen ratings will go up, we suspect CNBC will then tout the good numbers.

Disclosure: No position in any company mentioned.

No posts to display