The Most Revolutionary Act

Diverse Ramblings of an American Refugee

Dr Stuart Jeanne Bramhall

Dr Stuart Jeanne Bramhall
Location
New Plymouth, New Zealand
Birthday
December 02
Bio
Retired psychiatrist, activist and author of 2 young adult novels - Battle for Tomorrow and A Rebel Comes of Age - and a free ebook 21st Century Revolution. My 2010 memoir The Most Revolutionary Act: Memoir of an American Refugee describes the circumstances that led me to leave the US in 2002. More information about my books (and me) at www.stuartjeannebramhall.com

MY RECENT POSTS

MAY 24, 2012 10:38PM

Insider Trading by Facebook and Goldman Sachs: Implications for New Zealand

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lawsuit

Learning that Goldman Sachs is being sued for insider trading for their role in misleading investors about Facebook’s initial public offering (IPO) is raising a lot of red flags here in New Zealand. Goldman Sachs is one of three investment banks New Zealand’s National government has chosen to manage the IPO of our publicly owned energy companies and Air New Zealand.

Just to be clear: insider trading is a federal crime the US. However given Obama’s extremely poor track record when it comes to prosecuting investment banks, the move by Facebook investors to file civil lawsuits against Facebook CEO Mark Zuckerberg and the banks who managed the IPO was a good call. It has prompted the state of Massachusetts, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the U.S. Senate Banking Committee and the House Financial Services Committee to launch investigations. In addition Morgan Stanley, one of the investment banks being sued, has announced that it will reimburse “some” investors who were ripped off by the insider trading. But according to analysts StarMine, Facebook shares are still overvalued and the stock price could drop as low as $9.59 a share (see Facebook IPO).

Why Facebook and Their Bankster Friends Are Being Sued

US mainstream coverage of this high profile crime has been somewhat sketchy. For example, most reports refer to the banks being sued as “Morgan Stanley and others.” You have to read the business or international press to learn that Goldman Sachs and JP Morgan, as well several smaller banks, were also among the perps. The reason Facebook et al are being sued and investigated is that they shared information about an anticipated drop in Facebook revenue growth with “insiders” (Facebook and institutional investors), but not with the general public. As a result public investors lost more than $2 billion when Facebook stock lost more than 17% of its original value ($38 per share) in its first day of trading. The Nasdaq exchange is also being sued, as much of this drop occurred in the first 17 seconds of trading, when Nasdaq software malfunctioned and investors were unable to buy, sell or cancel trades. (Facebook investor sues Nasdaq).

In my view, Goldman Sachs is a particularly important player in this debacle. Goldman Sachs and funds they manage already owned $850 million in Facebook shares. They sold 28.7 of their 65.9 million shares at $38 per share for $1.9 million. According to my calculations, that works out to approximately 500% profit.

Public Opposition to the Privatization of State-Owned Assets

Even before this latest scandal broke, a lot of New Zealanders were really unhappy about our government’s plan to pay Goldman Sachs and two other investment banks $150 to manage the IPO of “a partial sale” of five of our state owned companies (see Oral Questions to Ministers). A lot of people view the decision to privatize our extremely profitable state owned energy companies as “ideological” (i.e. benefiting investment trusts and wealthy New Zealanders who are Prime Minister John Key’s major backers). Key himself is a former investment banker and a former member of the New York Federal Reserve (NZ Parliament John Key).

It sure makes no economic sense to sell companies providing an average 7.6% return to New Zealand taxpayers – at least not when the cost of overseas borrowing is 4-5%.(see 10 myths about asset sales). A recent study shows that past privatization of publicly owned companies by the Labour government made the New Zealand economy worse off. Not only did the loss of revenue necessitate an increase in overseas borrowing, but ever since these companies wound up in foreign hands, there has been a steady loss of our country’s wealth in profit/dividend transfers to foreign investors (see Ganesh Nana study).

Organized Opposition to Asset Sales

There is a particularly strong opposition to the asset sales in the Maori community, which they feel violate the Treaty of Waitangi some of their chiefs signed with the British in 1840. The New Zealand Maori Council has filed a legal challenge with the Waitangi Tribunal.

On May 12th, a coalition of other groups (Grey Power, the New Zealand Council of Trade Unions (CTU), the Labour Party and the Green Party) launched a petition demanding a Citizens Initiated Referendum on state assets sales. As a member of both Grey Power and the Green Party, I’ve been out in the streets nearly everyday collecting signatures. Nearly everyone I approach signs. They already know the people who run Goldman Sachs are crooks – and don’t want them anywhere near our public utilities or Air New Zealand.

***

Hall of Shame

Below is a list of the Facebook inside traders who cashed in big by selling their shares before the stock price plummeted:

Mark Zuckerberg, Facebook CEO

Shares sold: 30.2 million

Value: $1.13 billion

Accel Partners, venture capital investor

Year invested in Facebook: 2005 for $12.7 million

Shares sold: 49 million

Value: $1.86 billion

Peter Thiel, PayPal co-founder

Year invested in Facebook: 2004 for $500,000

Shares sold: 16.8 million

Value: $640 million

DST Global Ltd, investment firm based in London and founded by Russian oligarch

Year invested in Facebook: 2009 and late 2010 for $200 million

Shares sold: 45.7 million

Value: $1.74 billion

Goldman Sachs, investment bank

Year invested in Facebook: 2011 for $450 million

Shares sold: 28.7 million

Value: $1.09 billion

Elevation Partners, private equity firm with Bono as spokesman

Shares sold: 4.6 million

Value: $176 million

Greylock Partners, venture capital investor

Year invested in Facebook: 2006 for $27.5 million

Shares sold: 7.6 million

Value: $289 million

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Comments

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Shouldn't these big thieves tone down a bit. I guess they are still legal. R
As the Mafia often remarks in Hollywood portrayals, "Nothing personal.Its just business." The historical function of private business is toget away with as much treasure with providing as little product as possible. The corporate and financial sectors are riding very high these days and the only businesses that provide even less return for their acquisition of treasure are the major religions. The storm of privatizations throughout the world are raping civilization and, thus far, there is little opposition. No doubt the real terrorists are gritting their teeth in envy.
Irony never fails to amaze me.

Wall Street bilks billions (possibly trillions) from the average Joe’s investments, home loans, etc.; hard-earned money invested in real property, real retirement funds and real savings for children’s educations. Bush and Obama bail them out, no questions asked, no spanking of the hands, no prison terms.

Wall Street scams a fellow billionaire who developed an utterly useless and frivolous "cyberdating service" and all hell breaks loose.

Simply beyond ironic!
Goldman Sachs and JP Morgan are subsidiaries of Bush and Rockefeller Inc. Just like Obama. Wasn’t it nice to see Facebook flop? Timinglogic predicted it.
Hopefully with the election coming, the House and the Dept of Justice can be pressured to put some of these A-holes in jail. The word for it is impunity. When you know you won't be prosecuted, you thumb your nose at the law.

It looks like Cameron's ties to Murdoch are going to bring his government down in the UK. Hopefully we can use John Key's ties to Goldman Sachs et all to do the same in New Zealand.