Facebook; Selling Shares in What?

I can understand a company which makes something or manages something or invests something being listed on the Stock Market and the public being invited to buy shares.

If this company operates a tin mine then one can buy shares and if the price of tin goes up or the company signs a lucrative contract, than the shares go up. If this company invests in development of wind power than if wind power becomes popular, those who own shares receive a dividend payment. I get that.

I don’t get Facebook.

This is no more than a ‘hang out’. Yes, it is in Cyberspace, and we really don’t see each other, or know each other, and have probably opened ourselves to scammers, and stalkers, and whatever, but the fact is, there is no ‘investment’. Yes, there are ads but I don’t really look at them. And I’m sure there must be those silly ‘You Won’ blurbs about the place, but I don’t see them.

When I heard Facebook was going to issue shares in the company, I was puzzled. How does anyone expect to make money off a free networking site?

Poeple who probably haven’t a clue what Facebook is about, or how the Stock Market works, ran out to throw their money at the share offer; which was about $38 each. This dropped to $34 dollars pretty quickly and Morgan Stanley raced in to buy up shares at $38 to prevent the value from dropping even further.

Many people who invested are now very very angry. New shareholders have filed at least two lawsuits against Facebook and Morgan Stanley, that is the bank which handled the public offering and then bought up shares. Many claim that negative analyst reports about Facebook were withheld.

So here we aree, people having purchase shares in a company which manufactures nothing, produces nothing, invests nothing and manages nothing, and now they are wondering if they made a mistake.