Facebook come to the market to raise money for its owners. To facilitate the IPO share valuation Morgan Stanley acted as the professionally face of banking to provide their expertise to evaluate what price the shares should be quoted at the opening bell. There are many ways of evaluating the value of a company and therefore its market price, and we trust the likes of Morgan Stanley to do their job to take into consideration all aspects of the flotation.
Morgan Stanley helped fix a price for the company, a price that people would have to pay to buy the share on opening . What we now learn is that Morgan Stanley didn't actually believe their own earnings projection for Facebook having been informed prior to the trading date that earnings were to be down graded and that this information had been released to certain investors.
Notice only certain investors. The rest were left in the dark, to be exposed to the Market as it came off the share valuation as in the know investors sold their shares.
To inflate the general dissatisfaction one holds for Banks, they seem to, once again be able to get away with what, in any other field would be classed as insider trading. The sight and sound of the financial annalists lining up on programs such as CNBC to defend the trade because,in their view Morgan Stanley had not broken any laws !! Morals, ethics these were nowhere to be seen or commented upon and it all reminded me of Lloyd Blankfein and his cronies at Goldman Sachs when they appeared before the US Congress. They simply couldn't grasp the issue of the ethics tied up in what they did as they created their dodgy financial products.
We have to keep speaking out about this "disconnect" between the law and its application or lack of it, depending on the business group.
Banks have been allowed to trade a commodity which by its very nature rewards enormously, since there are few overheads to producing a profit.
There is no inventory cost, no marketing cost, no distribution cost, and nothing in terms of physical assets produced which can be fed out into the populous to make the lives of ordinary people better. Even the contribution of "tax take" is minimised by clever accounting and the off balance sheet sums never see the light of day.
What other industry manufactures the product of their trade (debt) and then, trades the debt in another market, forward selling, shorting, what ever, to create many multiples their initial creation. When they needed more to trade, they create more through dodgy loans !!!!
I might have a pennyworth of chips on my shoulder, as you often remind me but surly you have to question the workings of this monster we have created ??
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