Stock Market Watch

Harvard Alumni making news – Be it Rajat Gupta or Mark Zuckerberg

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It is news of the year if not decade or century.

Facebook IPO posted on everyone’s wall,
Facebook Facebook had a great fall,
With all the unscrupulous leadwriters and short sellers
Couldn’t move facebook stock up on the Wall Street again

Facebook Inc (NASDAQ:FB) is down nearly 10% when writing this article, Circuit breakers tripped, NASDAQ admitted there is some technical glitch on first day of facebook. Everything went kaput on the day facebook IPO was listed except one – Mark is now officially a multi-billionaire.


With this great fall, money nearly worth nineteen billion got vanished from the market or should we say changed hands from the foolish to the smarter ones. People are blaming the steep opening price of the shares to be the main reason for the fall. Investors are now speculating that the opening price should have been around eighteen to twenty dollars which would have been a fair estimation of the company. But where were these smart people before the launch of the IPO, even I wonder. Now that the cat is out of the bag market pundits would say it anyhow “I told you so.” The question that still remains is many peole would have taken a bullet with their savings on facebook going down 10%.

In another event of news – Rajat Gupta would be undergoing a three week trial on the charges of insider trading. He is being charged to leak information from board meetings to his. This brings us back to ethics and integrity issues. What message does it convey to us when it comes to ethics? It tells us that people who donate millions in charity also have an impulse to cheat the system whenever they can. Having said that – the case of Rajat Gupta is still under trial and the charges are not proved against him. He is innocent until proved guilty. It is alleged that Rajat used to leak information to his friend Raj Rajaratnam. He is alleged to be sending information on Berkshire Hathaway Inc’s $5 billion investment in Goldman during the 2008 and also the loss that Goldman suffered in this fourth quarter results that year.

Gupta is not a new kid off the block, Gupta’s career shows an impeccable graph with pedigree from Harvard business school and thirty four years at McKinsey with nearly nine years at the helm of McKinsey.

With these instances it makes me wonder if Harvard is giving a boost to future conman. People, who are masters in the trick of conning. Be it willful hiding of revenues of facebook or be it beating the odds to be a top boss at McKinsey and then later on committing a sin which may not be his first but the first one to get caught. Who knows what the truth is – but it seriously brings us to question ourselves – do we see the credentials of a person beyond his college education? Harvard in itself is a brand powerful enough to take someone through to the top, or to make a website affiliation a status symbol, no matter if he is conning and lying all the way. But who are we to judge the five counts of securities fraud and one count of conspiracy against Gupta or if Facebook withheld the information on revenues before launching its IPO.

What’s common between Mark Zuckerberg and Rajat Gupta – they both have Harvard mentioned in their CV. This time we need to put a serious thought on whether having a powerful brand college makes us believe in whatever they say or do. Or do we need to look a little bit deeper and see these alumni are actually smart or just one of those who are excellent at cracking an interview and exceptional at writing statement of purpose, and nothing more. The rest, the college affiliation will take care of.

Today after what our world have seen, what no other generation would have witnessed before is the falling of behemoth companies like Enron, Lehman and many big organizations on the brink of filing for Chapter 11. What we have seen is a Capitalistic country being driven by government aids to sustain its big capitalistic banks and airlines. What we see is that even after series of debacles based on incorrect techniques used for valuation we still falter on companies like facebook.

What’s wrong with what Rajat Gupta did would be decided by the trial that would last for three weeks but what the Morgan Stanley – lead underwriter of the facebook IPO – did wrong will probably go unnoticed. Morgan Stanley would have made a decent cut in its transaction and is out of the “whole 19 billion evaporating from the market“ scene. But does it realize that there would be some couple of thousand investors who would have put in their savings in such IPOs thinking that it would help them in their retirement plans and now what they have is a 10% less wealth they had before Friday. Someone should be held responsible for overvaluation of the stocks. Every penny should be accounted for.








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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