Economics

Facebook, Russia, & Reagan

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Ron Hart over at The Daily Caller notes Facebook's recent overseas stock offering:

With the proliferation of cumbersome and often ambiguous American financial regulatory laws, companies like Facebook choose to let people in other countries invest in their growth, not Americans. Such was the case with Facebook's most recent offering where, instead of filing all the complicated paperwork and risking our litigation/regulatory system, it sold $1.5 billion in shares to Russian and other overseas investors, giving them what will probably be a hefty profit. All the layers upon layers of rules and regulations Washington has heaped on an already-fragile financial system have hamstrung our competitiveness and sent jobs and investment money to friendlier shores.

Facebook's recent financing venture is a wakeup call. Russia, run by ex-KGB officers, is viewed as an easier and less intrusive regulatory environment than the U.S. The Russians will make a huge profit on an investment that, just a few years ago, U.S. investors could have reaped. That Russia, a country that once crumbled under the weight of its own immense bureaucracy, is now less regulated and more business-friendly than America speaks volumes

If Ronald Reagan had known that we would head toward socialism and our Cold War adversaries would go from communism to capitalism, he might have altered his famous line: "Mr. Gorbachev, reinforce this wall!"

More here.

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  1. Or, the whole of the Facebook IPO is an enormous pump-and-dump stock fraud that even the elementary sort of disclosure the SEC requires would immediately lay bare.

    1. So, you’re hoping to short Facebook then?

      Is that right?

      1. You can’t short a private company. There’s no way in hell Goldman would let anyone lend the shares to go short.

        1. If Rob McMillin wants to risk his money on Facebook dropping below the closing price on the first day Facebook does go public?

          I’d like to hear that!

          Unless he’s a hedge fund manager, he’s obviously missed his calling.

          P.S. I have never and never would buy shares in Google at their multiples–but I sure as hell wouldn’t short ’em either.

    2. So we’re supposed to feel bad that paying 25-50x revenue and 100 P/E without looking at the financials?

    3. 90% of IPOs are pump and dump in the short run.

  2. Oh, and somebody might notice too? Where the offerings happen, the jobs are likely to follow…

    There’s no rule that says New York has to be the investment banking capital of the world.

    Those are high paying jobs we’re talking about losing too! Why would we want those jobs to go somewhere else?!

    So the president can’t shake his scary finger at Wall Street anymore?

    London may have already surpassed us as the financial center of the world anyway–and it wouldn’t surprise me if Singapore continues to close the gap…

    That was one of the stupidest things the Obama Administration has done yet! Crippling Wall Street with international agreements?! Why in the world would our competition in France, the UK, Switzerland and elsewhere agree to do that?!

    …could it be because they compete with us?! We may have had worse presidents than Obama since the end of the Cold War, but we haven’t had any that were nearly as stupid.

  3. Wow, Ronald Reagon was just cool like that!

    anon-tools.tk

  4. If Ronald Reagan had known that we would head toward socialism and our Cold War adversaries would go from communism to capitalism, he might have altered his famous line: “Mr. Gorbachev, reinforce this wall!”

    Nick, this is dumb even by your standards.

    1. My sincerest apologies. This is actually typical Ron Hart.

    2. The point is that we are slouching towards socialism even as what was the communist world continues to embrace capitalism.

      It’s a fair point.

      How could we have forgotten so quickly what we used to know so well? Why are we working so hard to emulate the losers of the Cold War, even as the losers are struggling to become what we once were?

      1. Hope and Change, baby! Fairness for all!

    3. SIV it is a joke that is thoughtful. They are heading toward capitalism and we are fleeing it.

      Hart is the best at making insightful jokes for the masses to ponder.

      1. ^^^^Ron Hart’s Sock Puppet^^^^

  5. Here’s a clue: if Goldman-Sachs thought this stock was worth a damn, they’d buy it all for themselves instead of pushing it on other people.

    1. If Goldman Sachs weren’t offering it to their customers, you’d accuse them of being greedy for doing that too!

      For cryin’ out loud–do you guys think this is the first hot IPO ever?!

      Mergers, IPO’s, that’s the kind of thing investment banks do for a living–it’s called “capitalism”.

      …and it’s a wonderful thing.

      1. Save your alternate world clairvoyance for Uri Geller.

        Capitalism is good, but not everything being sold is worth buying.

        1. Maybe I read what you were saying wrong, but it sounded like sour grapes to me!

          We shouldn’t give a crap about our opportunities to participate in capitalist enterprises going elsewhere because of our regulators–because investment banks wouldn’t sell participation in IPOs if they were worth owning anyway?!

          If I had that wrong, I apologize. …but that’s the way it sounded to me.

      2. Ken, Facebook is wildly overvalued – that much should be fairly obvious to someone with common sense and a modicum of business knowledge.

        Take a look at the few ads that they run: junk T-shirts, dating websites, and one or two mainstream companies. No way they’re worth 50 billion.

        1. “Take a look at the few ads that they run: junk T-shirts, dating websites, and one or two mainstream companies. No way they’re worth 50 billion.”
          They are to the greater fool.

        2. “Take a look at the few ads that they run: junk T-shirts, dating websites, and one or two mainstream companies. No way they’re worth 50 billion.”
          Or, hey, let’s wait for our whacko day-trader shriek to scream his analysis!

        3. “Ken, Facebook is wildly overvalued – that much should be fairly obvious to someone with common sense and a modicum of business knowledge.”

          The stock, like any other, is worth what people are willing to pay for it.

          I wouldn’t buy their stock and hold it at the valuations I’ve seen–no way.

          I said the same thing about Starbucks and Google too. When Google went public? Its PE ratio was about 120!

          There isn’t anything about Ken Shultz that makes him want to invest in a stock trading at that valuation–but other people bought it and held on to it! And they all have one thing in common…

          They’re glad they did.

          The point here is that just like everything from gay marriage to taking drugs, just because it’s something I don’t necessarily want to do doesn’t mean no one else should be allowed to do it…

          And if anybody here is suggesting that I should be okay with Barack Obama’s army of asshole regulators circumscribing my opportunities because, oh well, no one should want to make that investment anyway–then they got another thing comin’!

          There isn’t anybody here who’s anywhere near smart enough to make decisions on my behalf–about what opportunities are in my best interest. You want to make decisions for other people?

          Have kids or get a dog–and leave me out of it!

          1. Ken, you are overstating the case here. Everyone agrees with you on freedom. What I disagree with is the notion that Facebook did what they did because of regulation (given that Ron Hart offered no proof) rather than for the reasons provided by Mo, Rob McMillan, and me.

            1. I’ve been following this since they first started shopping the Facebook deal around. Here’s a random snippet, but you can find others elsewhere…

              “Consider the recent Facebook fiasco. Goldman Sachs stated that it wouldn’t offer Facebook shares to U.S. customers because “the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law”…

              http://online.wsj.com/article/…..67856.html

              Russian investors are thrilled though, I’m sure.

    2. Bingo. But for anyone who thinks private investments overseas are a good deal I could use some help liberating some funds from a bank in Nigeria.

      1. Am I supposed to assume that you think it’s a bad idea for Russians to invest in Facebook because Facebook is based in the U.S? Or am I to understand you think it’s a bad idea for Americans to invest in Facebook because you think Facebook is based in Russia?

  6. Not surprising to anyone, Ron Hart offers absolutely zero evidence that Facebook’s private shares sales had anything to do with regulation. As stated above, it could have everything to do with scamming less sophisticated investors into buying overvalued stock.

    There is embarrassing, and then there is linking to this garbage piece approvingly. This is “Humvee/Prius-level” bad.

    1. Can you see the other side of this at all?

      Just out of curiosity, do you have any inkling whatsoever why someone might think being part of the private placement ahead of a Facebook IPO might be a good idea?!

  7. Looks like Jim Rogers might need to amend his “move to China and learn Chinese” comment to include include Russian.

  8. SHUT UP DANNY DEVITO

    1. I WAS RAISED ON THE DAIRY, BITCH!

  9. Wow, investors are missing out on the deal of a lifetime…

    The firm would levy a 4% placement fee on clients, plus a .5% “expense reserve” fee. It would also require investors to surrender 5% of any profits, known as “carried interest,” according to a Goldman Sachs document.

    Oh, it also contains a backstab clause where Goldman is allowed to short your dumb ass without telling you. The whole thing is a joke.

  10. Russia, run by ex-KGB officers, is viewed as an easier and less intrusive regulatory environment than the U.S. The Russians will make a huge profit on an investment that, just a few years ago, U.S. investors could have reaped. That Russia, a country that once crumbled under the weight of its own immense bureaucracy, is now less regulated and more business-friendly than America speaks volumes.

    This is so dumb and untrue. Come on, the country murders people who expose corrupt business practices. In Russia, it’s not about regulation, it’s about ability to support the oligarchy, by at least not making waves. Regardless of the reasons for Facebook’s private placement overseas, it’s not because Russia is more business-friendly.

    1. Also, FWIW, I do think the SEC is far too aggressive on private placements, and it’s that way because it’s defending itself: what could be worse than a successful business deal in which informed investors accept less disclosure and forgo the SEC’s stamp of approval? If you raise the cost of being publicly traded, the only way for the SEC to prevent such a scenario is to increase the costs of being privately traded.

      But I really take issue with the idea that a shithole like Russia is, generally speaking, more “business-friendly.” This is just one particular area where they play nice. And there’s a reason Facebook started in the US: we have the best venture capital funding in the world, bar none.

    2. Amakudari, Putin is an ex KGB guy. The country is lousy with them, Hart is dead right and freaking funny as hell.

      1. What did I post that gave you the impression I thought Russia wasn’t a mafia state? Did you just read one sentence or something?

  11. Hart writes like P.J. O’Rourke and has a very smart way about his humor. He is in our paper, the Orange County Register, which leans libertarian.

    Let’s not eat our young.

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