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The Adam and Eve IPO | ||
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By DAVID MOON, Moon Capital Management And the Lord God called to the man and said to him, 'Have you eaten of the tree I commanded you not to eat?' And the man said, 'the woman whom You gave to be with me, she has given to me of the tree, and I ate.'
It wasn't Adam's fault.
Had Eve lived in America rather than Eden, she would have probably found herself in a lawsuit, sued by her husband for pain, suffering and causing them to be evicted from their really nice rent-free home.
Of course Eve would also have filed suit against the Creator for, among other things, creating an attractive nuisance. Of all people, He should have known not to make that fruit so tempting or that serpent so persuasive.
It wasn't Eve's fault.
When things go wrong, it's usually the fault of the guy with the most money or power.
Look at the recent initial public offering (IPO) of Vonage, the Internet phone provider.
One of the criticisms of IPOs is that they often trade immediately at higher prices ' but are available only to institutional shareholders or otherwise favored clients of the underwriting firms.
When Vonage announced it was about to sell shares to the public, it set aside 15 percent of the planned offering to be available to its customers. By setting aside some shares for its customers, Vonage was, theoretically at least, giving these loyal 'little guys' an even shot at these same quick and easy profits.
Except the quick and easy profits didn't come. On the first day, the shares declined 24 percent, from $ 17 to $ 13.
Scores of the company's customers who bought IPO shares are now claiming they were unsophisticated and the company took advantage of them by selling them shares in the IPO. Plaintiffs in a class-action suit want the company to reimburse their losses.
If Vonage's stock price had skyrocketed on day one, I wonder if these customer-investors would have been too unsophisticated to keep the profits.
For years, CNBC guests have lamented that individual investors rarely get an opportunity to buy new company stock at IPO prices. Even the Securities and Exchange Commission website points out that it is often difficult for individual investors to purchase IPOs. Yet in the past week, the CNBC talking heads have questioned the prudence of Vonage in allowing its customers to participate in the IPO.
This is exactly the type of opportunity most proponents of the individual investor claim to support. That is, until someone loses some money. Then you must find someone to blame.
If Vonage exploited its position as these customers' telephone service provider to use voice mail or email to solicit investments in violation of SEC regulations, the company ought to be held responsible. But no one bought Vonage shares at gunpoint. I suspect most, if not all, of the individuals who invested in the IPO had at least a passing thought about Google's meteoric rise. So they took the fruit. And now they see that they are naked. David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).
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