What Is An IPO

Definition of an IPO.

The Facebook IPO will be remembered as one of the greatest pyramid/ponzi schemes. The founders and their financiers are trying to cash out now before Facebook becomes the Myspace wasteland. It is certainly in their interest. What a joke American business has become. We don't produce anything anymore, we're all just speculators and gamblers now. From the article:

The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller startups seeking to expand their businesses. There's nothing wrong with wanting to expand, but most of these firms had never made a profit and didn't plan on being profitable any time soon. Founded on venture capital funding, they spent like Texans trying to generate enough excitement to make it to the market before burning through all their cash. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an exit strategy, implying that there's no desire to stick around and create value for shareholders. The IPO then becomes the end of the road rather than the beginning.

They're just trying to sell to greater fools.

And if you aren't convinced, let me put it another way: if you are running a profitable business, why would you go public? If Facebook made money, why wouldn't you just pocket the cash? What is Facebook spending money on? It can't have that many employees. They don't pay for content. If this is a good business, why go public at all? The founders and early investors are trying to cash out, that's why.