Reggie Middleton breaks down "Muppetology" and the Chinese Wall!
Welcome to Capital Account. It's been a week since Facebook's disastrous debut. The stock didn't even get that initial pop that we have been so used to. Now we've seen shareholder lawsuits, subpoenas, not to mention a whole lot of mind-numbing news coverage in what was an overvalued IPO price. But why did so many people miss this in the first place, even though there was plenty of evidence to suggest that this was a deal only for the biggest of muppets? Could muppetology help us figure this out? Reggie Middleton will be on Capital Account today to give us a few lessons. Remember, he laid out all of the problems with Facebook's valuation on this show long before the IPO, so he’s just the man to help us figure out what exactly the big investment banks like JP Morgan, Goldman Sachs and Morgan Stanley missed on this one.
And muppetology aside – this Facebook case may illustrate some problems with another funny wall street term: Chinese Wall. Chinese Wall refers to the hypothetical barrier that is supposed to exist on Wall Street, separating research analysts from investment bankers. Remember, Washington tore down this wall entirely in some cases with the mis-named "Jobs Act," but most independent analysts worth their salt believe that it was compromised to begin with. Reggie Middleton should know. He has been going toe to toe with analysts on that wall, blasting their research and punching holes right through their bogus analysis.
And with all these terms floating around today, we thought it would be perfect to bring back our popularly demanded "Word of the Day" segment. Today's Word is, appropriately enough, "Herd Mentality." After all, if you think as part of the herd, you are gonna end up a muppet with your face torn off. Maybe the Facebook IPO should have been called "Faceoff IPO?"