Why Facebook Stock is doing a Faceplant

Shah Gilani

Forget all the hype.

And you can even forget that I told you Facebook was a hyped-up offering, and that I would sell my shares if I was an insider, and that I definitely wouldn't buy the IPO on its first trading day.

Did you listen to me?

If you didn't, and you own Facebook stock (Nasdaq: FB), here's what you have to worry about.

The Facebook Stock Concerns

First, did you get your confirmation? Probably by now you did.

But the problems that NASDAQ OMX Group had sending out electronic trade confirmations in the heat of trading on Friday were staggering. (They eventually went "manual" on the opening day of the biggest tech offer ever on the biggest tech exchange in the world… how ironic… manual.)

There's nothing out there, nothing anywhere about who or how many people did or didn't get confirmations or when they got them. There's nothing out there because the exchange is panicking, and if thousands of confirms, or tens of millions of shares, are up in the air… well imagine what could happen.

Imagine all the trading problems that are out there with Faceplant shares. Imagine you wanted shares, didn't get a confirm that you bought shares, and you put in another offer to buy shares.

Imagine you now own double the number of shares you wanted, but still don't know that you own any. Imagine you bought at the high, maybe $42 and change, and imagine instead of rising well above that price, the stock fell back to its IPO price of $38, and only didn't fall below that because the lead underwriter Morgan Stanley (thank God it wasn't JPMorgan (NYSE: JPM)) had to spend billions supporting the shares to keep it from becoming a disaster IPO.

Okay, you don't have to imagine the last part of that, because that's what really happened. And, actually, you don't have to imagine any of that stuff actually happening, because it did happen.

Now, here's the thing.

The market had a really bad week. (You should be happy if you bought the protection I suggested previously; my subscribers are up triple digits on some of those hedges.)

But if today, Faceplant buyers who have stock they didn't want, want to sell it, and there may be a lot of them, the question I have is, what will the Facebook stock price do?

If it falls, that means the underwriters aren't supporting it. That will be a disaster, not only for Faceplant, but for the market.

[As of 10:30 a.m. EDT, Facebook shares had slipped about 11% to just under $34.]

We've got a heavy week ahead of us. Don't blink. This upcoming week may make or break you and the market.

Let's hope not.

Related Articles and News:

• Money Morning:
  The Facebook IPO Facts, The Good, The Bad, the Ugly
• Money Morning:
  Who Wins with the Facebook IPO
• Money Morning:
  Facebook's IPO Price Too High? Not For The Woz
• Money Morning:
  Facebook IPO Price Range Values Company Near $100 Billion
• Money Morning:
  Facebook IPO: Where's the Love, Mark Zuckerberg?

Shah Gilani

About the Author

Browse Shah's articles | View Shah's research services

Shah Gilani is Chief Financial Strategist for Money Map Press and boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker. The work he did laid the foundation for what would later become the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk and established that company's "listed" and OTC trading desks. Shah founded a second hedge fund in 1999, which he ran until 2003. Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see. On top of the free newsletter, as editor of The 10X Trader, Money Map Report and Straight Line Profits, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade using a little-known strategy. Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on FOX Business' "Varney & Co."

… Read full bio