100% Within the Rules, But What About Ethics?

Facebook was down another .72 to 28.10 today. And there was late news today, as follows:

NEW YORK – Morgan Stanley (MS) Chairman and Chief Executive James Gorman defended the securities firm’s role in Facebook Inc.’s (FB) tumultuous initial public offering, telling employees internally that the firm worked “100% within the rules” and calling the steep decline in Facebook’s stock “disappointing.”

Gorman, in a weekly strategy meeting Tuesday, which was later webcast to employees, said “speculation of nefarious activity” surrounding the social networking company’s IPO is untrue. Contrary to some reports, he said, he wasn’t “aware of any dissent” among the underwriting firms regarding Facebook’s IPO price of $38 a share. Continued

Later…I read the following:

…the SEC’s review of Facebook’s IPO suggested technical failures and not rule violations, according to a report. And the SEC may propose new rules to delay trading when future IPOs are priced… Continued

Well, they’re both right. What, no violations? No I don’t think so. In fact, I disagree with the people that are suing, saying that the information about the slowdown in Facebook earnings wasn’t out quick enough. In fact, I read you this information on my radio show before Facebook came public.

That’s where I stop being nice

You see, what the Morgan Stanley CEO forgets is that nobody gives a frying crap about whether they worked within the rules on doing this initial public offering. What people care about is the ethics and lack of fiduciary responsibility when bringing public a company with a $100 billion market cap – that has less than $4 billion in revenues.

What about that Mr. Morgan Stanley CEO? What about giving a hoot about the investing public, instead of your fees and trying to amass the highest price possible, leaving not one crumb left over for the investing public? What about that Mr. Morgan Stanley CEO?

You see, Mr. Morgan Stanley CEO, forget the rules! Logic, ethics and fiduciary responsibility says, YOU STINK!  Mr. Morgan Stanley CEO…part of your job is to just do the right thing.

That’s all.

Just do the right thing.

Because I’ve got news for you Mr. CEO of Morgan Stanley. If you took the name Facebook off of this IPO and just had any ordinary company come public that has less than $4 billion in revenues and their earnings were declining and sales were slowing…hmm let me see what valuation you would put on that.

$20 billion? Maybe.

BUT NO…you wanted $100 billion.

Now let me tell you why you did it, Mr. CEO of Morgan Stanley. Because you have other companies coming public and you want the highest price possible. You want to create a bubble like you did in 1999.

You did not learn any lessons from 1999 – not to screw the public.

Instead,  you screwed the public again.

There’s only one bit of good news coming out of this. Yeah, the investing public got screwed a little bit.

But you got screwed worse Mr. Morgan Stanley CEO. Because your credibility is SHOT. My thoughts on you are SHOT. And maybe just maybe, your stock price down at 13 bucks is telling you that your ethics and fiduciary capability is shot.

What are the repercussions of your greed?

You’re being sued.

Secondly, your credibility is shot.


Thirdly, we enter Kayak.com. Kayak.com is delaying is IPO. Guess who is the underwriter of the Kayak.com IPO? MORGAN STANLEY.

So take your rules and stick’em.

I care about the investing public.

You don’t.

A $100 billion market cap? I’m just this little guy on radio. Under the radar. And I was on my show every day saying $100 billion cap, are you sick in the mind? Doesn’t valuation matter to these people?


Anyway maybe Mr. Morgan Stanley CEO. Maybe you’ll learn a lesson this time. But I doubt it.

Facebook is at 28.10 and as I’ve told you, if I had to slap a valuation on this sucker…$15. Maybe. Doesn’t mean it goes there. Not a prediction…just putting a little reality into the numbers.  

I’m not here to be right. I’m just here to help you guys and to make sure you don’t ever get caught up in the touting and the hype. Because even right here, it still has an $80 billion market cap. And who would pay $80 billion for a company that has less than $4 billion in revenues…with sales slowing and their earnings declining???

I don’t know who would pay it, but I certainly know who would sell it to you.



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Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.

1 reply
  1. Shorty says:

    All I know Gary is I I’m gonna short the heck outta facebook..

    You know who I am. You got it! Its me ..Shorty!

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