Facebook shares – lessons for crowdfunding
Thoughts on Facebook and crowdfunding with a few from Warren Buffet
Facebook lost $4bn – with share price falling from $38 at flotation to $31.78 earning it a new title Fadebook.
Two class action lawsuits claiming the share prospectus had “materially false and misleading statements” (Darryl Lazar)
Did key large investors know more about the IPO (initial public offering) than others allowing them to sell rather than buy? Only 10-15% of shares are likely to have gone to small investors – who have paid the price for the fall.
‘Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.’ Warren Buffet
Startup and small business is looking to raise finance through crowdfunding equity and investors are hoping to make money through investment.
Early thoughts and lessons for hopeful crowdfunders and investors
Critics of the US JOBS Act raised concerns about increase in fraud
The allegations against Facebook might not be true but it shows that if investors do not make the killing they desire – then they’ll look for someone to blame. Bid investors – big lawsuits.
Crowdfunding campaigns and the platforms need to ensure they are open and transparent. Proposals need to be watertight and checked out fully (as of course was Facebook’s.
‘Risk comes from not knowing what you’re doing.’ WB
Critics also raised concerns about the small and unsophisticated investor losing money
Big and small investors can lose out as the Facebook floatation shows.
Investing in shares is a gamble. It’s always been gambling and always will be.
You may very well end up losing your investment
Never invest more than you can lose
‘Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.’ WB
Invest for the long-term to build a business through crowdfunding
What is happening in Facebook is that the investors only wanted to make a short-term gain. Dropping $38-$31 is not a collapse – if you hold onto your shares. The gamblers are after a quick killing – they do not care about the business. Crowdfunding should encourage responsible investing – for people who want to build a business with the founders.
‘Always invest for the long term.’ WB
‘If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes.’ WB
For some reason this great video does not link – please have a look and enjoy!
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Join me on an introduction to crowdfunding workshop
Rochdale 26 June 09.30-13.00
Workshop in partnership with CVS Rochdale
Venue: CVS Rochdale, Partnership House, Sparrow Hill, Rochdale OL16 1QT
Crewe 3 July 10.00 – 15.30
Workshop in partnership with CVS Cheshire East
Venue:The Exercise Studio, Belong, Brookhouse Drive, Crewe