Last week I wrote a post titled "Facebook primes the IPO sucker pump" that drew several interesting and relevant comments from readers.
One commenter included a plug for a new blog he/she just launched. Normally I greet self-promotion from readers with some wariness (and, sometimes, weariness), but I really liked where this blogger was coming from, so I Googled the title of the blog (the author didn't provide a link in the comment).
I'm glad I did, because this is my kind of blog. If you are like me and view the steady roll-out of social media IPOs as a systematic effort to enrich the few at the expense of the many, then The Social Networking Bubble is for you.
The new blog is written by a person who calls himself (or herself) Tincup. And if the blog's tagline -- "Exposing the fraud from pump to dump" -- somehow doesn't make it clear enough what the author's goal is, he/she tells us in the "About this blog" section:
I believe the social networking sector is yet another scam, Ponzi scheme, rip off, or fraud, which is being performed before us by the same actors responsible for the Dot Com bomb and the housing derivative debacle. These crooks or shysters include venture capital firms, founders and high-level management of the companies involved, investment bankers or Wall Street, and some powerful forces in the media.
Say it, brother (or sister)!
Tincup promises to "track the evolution of the Social Networking sector as more companies go public this year and to provide insight into the scam."
I like to do that too, as anyone who reads me regularly knows. But my Tech Business Today blog has a broad scope, so I can't focus 24/7 on social networking IPO skepticism.
Fortunately, now there's a blog exclusively dedicated to that noble goal. And Tincup really seems to know what he/she is talking about. The latest post (there are only three so far) is called Inside The IPO Gravy Train (one of my favorite topics), and it offers a detailed and impressive analysis of the real purpose of many IPOs:
Initial public offerings, in many cases, are not primarily undertaken to raise capital for the company, rather, they are undertaken to vastly increase the bank accounts of the insiders. It is the insiders that can reap the greatest rewards from an IPO, not the company. And the company is what all the outside investors pay for when they buy shares on the public stock exchange.
Tell us something we don't know, right? But using simple examples, Tincup lays out this complex process in a way that makes it understandable even for readers who thought an S-1 was a guitar formerly made by Gibson.
In the blog's debut post, Tincup focuses on LinkedIn executives and other insiders who have been selling off huge chunks of pre-IPO stock grants at unbelievably high profits.
"Back in the good old days, you would never see the executive management team dumping such large percentages of their shares," Tincup writes, "for they wanted to send the message that they believed in their ability and business model to continue driving the stock price up in the future."
Let's face it, the warnings of a few skeptics like Tincup and Business Insider's Henry Blodget are easily drowned out by the corporate media-enabled Wall Street IPO hype machine. Still, I'm glad they and others are still trying to inject a modicum of sanity into the public discourse.
It might not stop the bubble from expanding (especially with Facebook grinding toward the IPO launch pad) and then exploding. But at least it's good to know, to quote the old X-Files slogan, that the truth is out there.