And now imagine if you had bought into a Facebook Fund…
- Joshua M Brown
- May 18th, 2012
The boiler room brokers who've spent the last 6 months pounding their clients and prospective clients to get in on their "Facebook IPO funds" now have some 'splainin' to do. I explained what these were in a post last week, read it here.
Anyway, now their "clients" are locked into a private placement vehicle that purports to own shares - most of which are likely 144 lock-up shares (non free-trading stock). They pitched the fund as "the only way to get in on Facebook before the IPO!" I imagine that the sizzle that sold this steak was centered around the potential of a massive opening pop and the exclusivity that comes with owning IPO stock in advance.
Only it didn't work out that way. Facebook can now be bought at the IPO price (and immediately sold if need be) by any schmuck on the street, anywhere in the world, with the click of a mouse. But if you have your capital tied up in one of these Facebook funds - well then you can only watch. And know that your broker is a troglodyte and that he probably got a nice inside commission for locking up your capital.
The silver lining here, of course, is that at least that portion of your capital is spoken for - thankfully, the broker can't margin it out and buy you any of his other top picks with it.
I like to look at the bright side.
I've gotten a few emails and messages from people who told me I saved them from pulling the trigger on these offerings with what I wrote. I'm really glad to hear that.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.