Legal Ramifications of Facebook’s IPO Trading Loss

Stock Market Crashes of 1929 and 1987

The recent events of the JP Morgan Chase billion dollar blunder as it was originally identified is now as of a couple a days ago, grown to $6 or $7 billion dollars. A federal investigation inquiry is now being pursued to look into the trading loss.

Today we receive word that Knight Capital a global financial services firm based in Jersey City, New Jersey, announced there was a $30-$35 million trading loss of the Facebook IPO. Currently, Knight Capital is urgently looking into possible legal remedies on their loss. This explains why we saw Knight Capital’s CEO Thomas Joyce was rather emotional on CNBC the other day.

Facebook is seeking claims for financial accommodations from NASDAQ. However, there is no guarantee that Knight Capital will recover any losses under any of their actions that NASDAQ make take. This stems from numerous problems and issues of NASDAQ resulting from the trading of Facebook.

At the same time, Facebook shares are ‘sliding another 8.6 percent on the market after a previous 11 percent drop leaving many investors to “Dislike” their stock.

So what we can take from both the JP Morgan Chase blunder and now the Facebook IPO hype is casino investing is not merely a banking problem but a global financial problem. One where investors should not buy on mere speculation, hype or emotions but on a solid investment opportunity. How much of that message is being considered by Global Financial Services in their daily practice?

In looking over the companies and their track records, we also should not forget that Google sustained their loss, not from an IPO, but simply the first week. So what we can take from this is that losses are nothing new to the investor arena of the financial services world. Likewise, nothing is a sure thing in the financial services world of stock investing.

Usually in the investor market with a new IPO, you will see a margin that is cut for retail buyers to have a good experience in their purchase. In the case of Facebook’s IPO they pinched every penny they could out of their offering price and used the company site to ensure their investment. Usually this creates an immediate return on an investment but can occur ramifications with future losses down the road. With Facebook it never really got off the ground with its launch.

Bill Middleton, president of Sound Portfolio Advisors of Mystic, Conn clarifies this point when he said, “They use the site and thought it might be a great investment – that it would soar,” he said. “I didn’t deny it wouldn’t soar in the early days. I was concerned about the longer term.”

The problem that Facebook did not realize before considering to present an IPO offering is that maybe investors are much wiser than they used to be and would question why the share would be offered at a high rate.

Google, JP Morgan Chase silencing the bell ringing activity apparently was not a preliminary thought prior to Facebook IPO ringing the bell with their stock price offering.

With recent events in the financial services world we have grave concerns over regulatory control over companies and their day-to-day activities with investors. Concerns which definitely question what authority is overseeing executive actions of which were taken in response to Black Monday, October 19, 1987, when stock markets crashed. The President’s Working Group on Financial Markets, the Working Group, was created by executive order 12631 under President Reagan on March 18, 1988 in response to Black Monday.

Black Monday market crash much blame was given to the Mortgage Crisis. In 2007, the US economy entered a mortgage crisis that caused panic and triggered other financial problems. Mortgage problems from the 2007 crisis have continued into this year and has extended into Europe and the euro’s decline.

We see this particularly in France where their is concerns now over whether banks there will be nationalized in response. So what we have at this moment is a global crisis without borders. JP Morgan Chase, Facebook, who will be next? Could U.S. history of the stock market be on course to repeating itself again with another lights out day on Wall Street?
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