What do many of America’s tech giants have in common? They’re really good at exploiting international tax laws and loopholes to enhance overall profitability.

We’ve talked about the shenanigans of Microsoft and HP here:

Forget Fairness, Let’s Talk About Stupidity (TRB)

But let’s not leave out Google, who has become the Michael Jordan of sheltering income from the collectors, around the world…

From Bloomberg:

Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show.

By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011.

Google paid a tax rate of 2.3% on overseas business last year, according to the story, even though most of that revenue was done in European countries with corporate tax rates of around 30%.

Gangsta.

Source:

Google Revenues Sheltered in No-Tax Bermuda Soar to $10 Billion (Bloomberg)

Read Also:

Forget Fairness, Let’s Talk About Stupidity (TRB)

The post Google’s Bermuda Tax Dodge appeared first on The Faster Times.

Hi, I’m Josh Brown. You might know me from such shows as The Fast Money Halftime Report on CNBC or Breakout! with Jeff Macke.

I’m not an economist by training (thank god). I’m just a street smart kid who watches (and chronicles) everything, has no political affiliations (I hate them all) and understands human nature way better than the cloistered academicians and theologians we’ve entrusted our entire business cycle to.

So with that caveat as preamble, allow me to walk you through An Alternative History of the US Economic Recovery – the recent past and present we could have gotten rather than the bullshit one we’re still muddling through now.

Keep in mind that the below is merely a simulation.

2009

It starts, as it must, with Barack Obama’s coronation as change agent extraordinaire in January of 2009. Rather than surrounding himself with bankster cronies like Larry Summers and Bob Rubin, Obama pays closer attention to the Volcker cohort within his tent and tackles financial reform first. Rather than blow the most historic mandate that any President in modern times has ever been handed on an ill-fated healthcare fight, Barack Obama focuses on the economy and the financial system from day one – which is why he got elected to begin with.

Meaningful regulation comes to Wall Street rather than the still-being-litigated graveyard grab-bag of armpits and shinbones known as Dodd-Frankenstein. Banks are given 120 days to divest themselves of all proprietary trading activities. Insured deposits are no longer treated as casino lines of credit, bonus-inflating gambles cannot be referred to as hedges. It all ends immediately and no one on The Street in early 2009 has the balls to say a word. They take their medicine and stand down as the mess they created is cleaned up by taxpayers and the grownups spin the chore wheel.

The message that there is law and order again is heard loud and clear, far and wide. We recognize that we are once again in a constructive capitalist atmosphere in which we can build and invest with confidence, not a fucking den of thieves populated with Wall Streeters, Washingtonians and every sycophantic bloodsucker who caters to them.

Prosecutions follow this restoration of the rulebook, thus engendering a renewed trust and faith in the system. Let me explain something to you that nobody seems to to understand: This is a Judeo-Christian society and we crave symmetry as well as a righting of wrongs and a meting out of punishment for wickedness. It is ingrained in us and we cannot move forward until the bad guys get dealt with and faith is restored. Sorry, this is a fact of American life – just look at our folklore and fables and beloved Hollywood film endings and Sunday School syllabi. You will see that I am right. The people need a satisfying ending.

With the return of regulation and the reaffirmation of our values in the form of perp walks, Americans can move on psychologically. They feel as though the chapter has closed which is a prerequisite for a new chapter to be opening. This leads to a resumption of business as usual rather than the next-shoe-to-drop syndrome that currently plagues us. We start fresh and leave the recent past behind us, it fades from view like the atrocities of Bernie Ebbers (WorldCom) and Jeffrey Skilling (Enron) faded from the public consciousness a generation earlier.

2010

This renewed confidence – real confidence, not that Wealth Effect bullshit from pumping stock and oil prices – translates into more spending and investment. Same as it always has for 5000 years. The robust recovery that corporations were crowing about in the summer or 2010 becomes self-reinforcing as small business owners and their employees buy into it. They plan vacations and have more babies, their kids move out of their houses and form households of the own. Multi-year commercial real estate leases are signed and people start investing for their future. The virtuous circle picks up where it left off, minus all the disgusting leverage in the system pre-2007. The allows the Fed to do then what would be unthinkable now – RAISE RATES.

The logic is unassailable – in 2010 we had a golden moment, Escape Velocity from low growth and the new normal was in sight! We had a chance to build on the nascent recovery’s momentum in that moment where US corporations were telling us that it was business as usual and demand was screaming back.

All we had to do at that moment was begin to shut the door on zero percent rates. People would have scrambled to run through that door before it closed. That loan to expand from one store to three, that revolving credit line to begin shipping product to Asia, that ReFi on the house to buy the two-family property next door…all of it!

When people see a wide open door – which is essentially what the Fed’s policy has been – they ignore it. “What’s the rush?” Bernanke’s out telling people no rise in rates until 2015. Guy’s brilliant but knows nothing about how people operate, the robot read books for 30 years instead of living life (please read The Poindexter Theory or why nerd economists can’t be trusted). He’s a self-proclaimed “Student of the Depression”, not a hustler or an entrepreneur. And by throwing money at the capital asset-holding upper class, he is accomplishing nothing in the way of velocity of money. There is no urgency on the part of the people he is making liquid with his bond-buying. The free-money borrowing rate for those who need not borrow does nothing to juice that money and get it going. Money supply and liquidity is meaningless if the cash don’t move.

Because that’s not how human’s operate. But they are highly motivated by desire for the things they fear may become out of reach. It is not until you begin to shut the door that people jump and get moving. This is why the Home Shopping Network displays a dwindling item countdown with a timer next to it. Salespeople in every industry call it “the takeaway” - Look, I only have three left, if you don’t want it I owe it to my other customers to call them now…

A 50 basis point hike and an announcement that “The Period of Emergency Monetary Policy is Ending” would’ve given the business community in this country exactly the jolt it needed at that time. Like a green light blasting them in the face. They’d have interpreted that announcement as “This is it, now or never” and the blueprints and business plans would’ve been unfurled across every conference room and kitchen table in America.

Escape Velocity Achieved. Mission Accomplished.

2011

Following that, an ordinary and orderly creep back up to 1% Fed Funds rate would’ve been possible, slowly so as to maintain low enough mortgage rates to allow the housing stabilization process breathing room. With the accompanying resumption of business activity and confidence, the banks could certainly have borne the hike and their net interest margins would’ve looked better than they do now. Again, the virtuous circle.

Granted, under this scenario the Republicans probably still take back seats and influence within Congress during the 2010 midterms, predominantly because the debt levels are still scary-big and Obama really sucks at communicating his own record. Also, he’s still black and there’s a built-in percentage of voters who will never get over that.

But in the context of a real recovery, the debt ceiling debate likely does not snowball into the events of Summer 2011, even if partisan rancor is still pretty prevalent. This means that S&P doesn’t downgrade the US as issuer and bonds don’t launch into this last leg of their multi-decade rally. Because we are more greedily productive and less shell-shocked in general.

2012

Coming into 2012, Americans are feeling good about their economic recovery and they are responding accordingly – by fueling its continuance. Income inequality begins to level off and hourly wages creep higher. The temporary and part-time workers of 2010 become full-time, in the absence of drastic healthcare cost fears, employers have little reason not to add staff in a burgeoning growth environment.

Europe remains a shit show, but it is their shit show. We giggle as Jay Leno does jokes about it and European investors plow money into US stocks and banks, anything to escape their own little Cirque du So-lame economy. Europe remains a risk for the US markets, but not one that we fret about every day for two and a half years.

Woe-is-me sad sack movies and shows like Larry Crowne and 2 Broke Girls never get greenlit and PIMCO’s ‘New Normal’ spiel becomes a trivia question in some forgotten Economic Edition of Trivial Pursuit. Bond funds do not take in a trillion dollars in net cash inflows over these years but equity funds do. This rising tide reduces the mental and financial strain on insurance companies, pension funds and other large investment pools.

The result of all of this is an unemployment rate closer to 7% with a renewed emphasis on programs like computer literacy and infrastructure refurbishments – rather than just the austerity and tax rate debate we have now. It’s not that the deficit isn’t out of control in this scenario, it’s that with building growth, trend change in the deficit is finally within sight. This eases the pressure so that we can think straight rather than scream about cliffs and slopes.

Obama probably gets reelected again but the Republicans have a more constructive message and voters reward them with large gains in both houses of Congress in November 2012. Geithner hands the reins to Dimon at Treasury, MSNBC never has the need to radicalize to the left and the Tea Party movement dissolves back into the Klan or the Civil War Reenactment Society or whatever the fuck it was before the Koch Brothers started writing checks and chartering coach buses.

And I’m not saying we fixed everything or that headwinds would disappear. But if we’d done it this way you’d probably be out doing more interesting things that reading blogs about the economic crisis. Because it would have already passed into history rather than lingering as it still does to this day.

And for those of you who are all excited to go into my comments section and say that psychology isn’t powerful enough to have changed the debt dynamics of our balance sheet recession, I would submit to you that every major turning point in world history occurred as a function of a psychological shift, economic history being no different. Greed and fear is all there is and all there ever has been. All of the major religions and geopolitical divisions since the beginning of time have come about as a result of people attempting to control or harness these two almighty forces for their own gain.

And lest you think I am Monday-Morning Quarterbacking, may I present to you the following comments I made in real-time as that moment of genuine recovery was passing us by:

Raise Rates, Cowards (10/21/2010)

In the Anti-Stimulus Camp, Jeff Matthews is Head Counselor (11/1/2010)

Einhorn Joins the Raise Rates Camp (12/27/2010)

But we blew it. And the Unrecovery continues. You can call it a “beautiful deleveraging” if you wish. I call it a missed opportunity. Especially when you consider how it could’ve been.

The post Another Way to Think About the Economic Recovery appeared first on The Faster Times.

I’m of the opinion that four years of writing taxpayer-funded fucking welfare checks and spending trillions on unemployment benefits was the dumbest possible thing on earth when you consider the state of the nation’s crumbling infrastructure and the social benefits inherent in putting people to work rather than keeping them in a perpetual state of begging.

I don’t care what the extremist nutjobs on the right or the left think about government-led public works projects or the “guaranteed” social safety net, respectively. I know deep down that people do want to work in general and that America would be doing better had the administration been more forceful and creative and had the GOP opposition stopped being such dicks about everything.

For example, just imagine if Congress and the President had mobilized a natural gas vehicle infrastructure project including transmission, service stations, engine science, cleaner fracking research, etc. America is the Saudi Arabia of natural gas with something like a 100-year supply based on reported reserves. We could have had an explosion in jobs and private investment to go along with something like that. And that’s one example of many things that only the government can set into motion so that companies and entrepreneurs are jumpstarted into motion.

But the President was a pussy who blew his mandate on health care and the obstructionist GOP-ers in Congress are regressive rednecks kowtowing to the economic innumerates in their Tea Party constituencies.

And so here we are, with very little happening in the way of productive projects for the benefit of all Americans.

Which brings me to Hurricane Sandy…

I threw out all of the contents of two refrigerators and freezers yesterday as did two million other homeowners without power this week. We’ll be replacing all of it once the juice comes back on. We’ll also see a massive new market for home generators in this storm’s aftermath along with continued runs on Home Depot and Lowe’s as people seek to put their property back together. And now we’re hearing estimates for public repairs that are astronomical ($20 billion just for NYC’s subways, for example). Much of this spending goes toward overtime for workers, parts and equipment from American manufacturers and all kinds of local construction involvement.

It ain’t ideal, but it’s still paid work and productive spending.

But is the Sandy clean-up really going to beneficial to the economy, net net? I’m not sure I have an answer. Here are some takes on the topic worth reading:

The post Can Hurricane Sandy Save the Economy? appeared first on The Faster Times.

“By the time they have been retired for two years, 78 percent of former NFL players have gone bankrupt or are under financial stress; within five years of retirement, an estimated 60 percent of former NBA players are broke.” - Sports Illustrated

Last night it seemed like the whole entire world was watching the ESPN show 30 for 30, which tackled the topic of pro athletes who have gone broke or filed for bankruptcy. I know some financial advisors who deal with NFL players, new and old and former. In many cases, they almost have to take on a parental role, especially as they get drafted out of college and can’t wait to go down to Myrtle Beach to get some dumbass slogan tattooed across their chest or whatever. There are calls at 2 in the morning about transferring money from one account to another, heavy-duty scoldings about jewelry purchases and frank discussions about how many cars a person actually needs to own at the same time.

Anyway, if you catch the ESPN doc, it was pretty amazing, if only for the sheer ubiquity of broke athletes – even star players with long careers who’ve made more than $30 million aren’t immune.

What happens to these guys is pretty obvious, it always seems like the same story, involving one or some of the below components:

1. Athlete overstimates the length of what his playing career will be. Then gets released or has a dire injury.

2. Athlete allows four or five of his boys from the neighborhood become a freeloading entourage. Once the money’s gone, so are his friends.

3. Athlete mistakenly assumes that success on the field guarantees success in the business world, buys car dealerships, car washes, restaurants, night clubs and backs his idiot family and friends in their own half-baked ventures.

4. Athlete signs over power of attorney to a scumbag or an incompetent because he just doesn’t feel like “dealing with this shit” and by “shit” he means his own future. Scumbag abuses trust and steals, swindles or loses the money in ill-conceived investments.

5. Athlete signs away rights and royalties to unscrupulous agents, managers, promoters early in his career when trinkets and a small amount of money dazzle him. Later, he finds out what he’s given up once it’s too late.

6. Lawsuits, divorces, child support, alimony and illness strike – huge expenses that were inconceivable to the 23-year-old who was nailing chicks three at a time in a hot tub ten years earlier.

Anyway, these are the typical pitfalls and 99 times out of 100 the broke athlete has made at least one of these mistakes. I’m not sure that it can ever be prevented given the de-emphasis on education our colleges are guilty of when it comes to their athletes. After all, colleges are businesses that cater to the check-writing alumni and the only thing the alumni care about is winning football and basketball games. The athletes are kept in the dark rather than taught the basics and many of them have grown up in an environment where money management just isn’t a topic of discussion.

So expect more of this.

More about ‘Broke’ on 30 for 30 here: ESPN

The post Why NFL Players Go Broke appeared first on The Faster Times.

Facebook shareholders have watched $50 billion in valuation blown to smithereens in three months and now everyone wants to point a finger as to how that could’ve happened. I’m willing to take the blame.

In the fable The Emperor’s New Clothes, the the clothiers of the titular ruler were repeatedly fooling their master, outfitting him in nothing but thin air and allowing him to strut about town like a peacock. But one day, whilst he walked through the streets amid cheering throngs, naked as the day he was born, a small child innocently dared to shout out that the Emperor had no clothes on at all. The townspeople gasped in horror at the sudden realization that their monarch was, in fact, without any clothing at all. And then the spell was broken, what was always in plain sight suddenly became obvious to all who had conditioned themselves not to notice.

And it was game over for the Emperor.

There were several of us who felt the pricing of the IPO was absurd and the frenzy surrounding it was even more so. I dare say that we represented the small child, with nothing invested in the storytelling of how great this deal would be. Amidst the riotous obsession with getting a piece of it, we helped to awaken everyone to the fact that the Facebook Emperor was not clothed in any of the fundamentals that would justify a $100 billion valuation out of the gates.

I know I did my part on three important occasions:

First: My nagging doubt about the permanency of Facebook’s Web 2.0 Hegemony, led to a piece that went viral before the initial public offering. I laid out the case for why the best days for the site were probably behind the company and that even though Facebook can make a lot of money, it’s user growth that people should be more focused on. Many investors and brokers have subsequently told me that this post was a primary reason they stayed away from the offering. I’m flattered that every once in a while, my out-loud ramblings can make a difference. The piece, from January 2nd, is here:

The Red Giant (Five Reasons Facebook Is Over) (TRB)

Second: I was live on CNBC for the pricing of the deal, the night before the company’s IPO. Ostensibly, everyone with an interest in it was watching to see where the stock would go public. They had me, a voice of caution and reason, juxtaposed with a brokerage firm salesman who had loaded up on the stock for retail clients and was extremely bullish. My take was that, let’s say Facebook is the greatest stock of all time, you still had time to wait and not buy on day one. I certainly don’t claim that the next morning’s lackluster open was a result of my comments, but again I’ve been told by many people that it was commentary that kept them from reacting to the hype. “Cool out is the keyword.”

The post The Fall of Facebook appeared first on The Faster Times.

Bernie Madoff’s ponzi scheme ran for multiple decades and was, at one time, estimated to encompass roughly $50 billion dollars – a record-breaker. Underlying it was a legitimate business (broker-dealer, investment advisor, hedge fund) but the returns were faked and so was most of the activity. I bring this up because I keep hearing a persistent undercurrent of furor about how “Facebook’s IPO was the largest ponzi scheme of all time.” Upon researching all available definitions of the term, I believe that it was not. But it took me awhile to get there, I admit.

Facebook attained a valuation of almost $100 billion dollars and when it ran out of new investors (upon coming public), it’s value promptly collapsed. In half. In an extremely short period of time (90 days). Everything about that feels scam-my. But a ponzi scheme? Let’s look at what that term actually means:

Investopedia:

“A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.”

Merriam-Webster:

“an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risk”

Business Dictionary:

“Scam in which gullible public is enticed with the promise of very high returns in a very short time, but is based on paying off the early ‘investors’ from the cash from (hopefully ever increasing number of) new ‘investors.’ The whole structure collapses when the cash outflow exceeds the cash inflow. The originators of the scheme, however, usually disappear with large sums a few days before the crash.”

So far, all of this lines up almost perfectly – Facebook resembles these descriptions almost perfectly. Early investors (venture financiers) being paid out an amazingly high rate upon the recruitment of new investors (the public in IPO day and in subsequent lockup expiries). But there is one aspect of a traditional ponzi where Facebook differs drastically – there were never any promises made in terms of rates of return.

One of the classic features of a ponzi are the promises of a high payment to investors on an ongoing basis, which is the very reason why new investors must be recruited all the time. Outside of the analysts’ expectations from the underwriting banks, it would be hard to say that anyone from Facebook ever promised anyone anything. In fact, the prospectus is even more loaded with warnings, risk factors and caveats than is usual for new issues.

The SEC’s definition of the term “ponzi scheme” features this promised returns aspect rather prominently:

“A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.”

And so while Facebook’s IPO (not the company – the stock offering itself) does truly resemble a ponzi scheme from almost every possible angle, there is one respect in which it is not one: They never promised their investors anything, they never pretended there was a rate of return coming to anyone.

And so as disgusting and unforgivable as the whole episode was, the ponzi label seems not to stand up upon closer investigation.

The post No, Mark Zuckerberg is Not the Next Bernie Madoff appeared first on The Faster Times.

Like Nino taking over the Carter Projects* and moving the manufacture, warehousing and distribution of crack cocaine right into the heart of the inner city, Jeff Bezos is about to turn battered local retailers into dead ones. Rock-a-bye, baby.

How do we know this? After years of lobbying and lawsuiting against states like California and Texas who wanted Amazon to collect sales tax for their residents, the company suddenly and quietly capitulated. They’ve announced that they are dropping their fight and will begin collecting state sales tax from customers this year. Why would they give up such a sick advantage over traditional, earthbound retailers?

Because they’re about to put the glock to their heads with same-day delivery. Awww yeah.

From Slate:

But now Amazon has a new game. Now that it has agreed to collect sales taxes, the company can legally set up warehouses right inside some of the largest metropolitan areas in the nation. Why would it want to do that? Because Amazon’s new goal is to get stuff to you immediately—as soon as a few hours after you hit Buy…

It’s hard to overstate how thoroughly this move will shake up the retail industry. Same-day delivery has long been the holy grail of Internet retailers, something that dozens of startups have tried and failed to accomplish. (Remember Kozmo.com?) But Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for lots of customers. If it can pull that off, the company will permanently alter how we shop. To put it more bluntly: Physical retailers will be hosed.

This is a much-read discussion about how this may play out, check it out here:

I Want It Today (Slate)

* I never do this, but here’s the aforementioned jacking of the Carter Housing Projects:

The post Amazon’s New Threat to Retailers appeared first on The Faster Times.

This weekend’s must-read is a feature story in New York Magazine that seeks to answer these questions or at least to frame the debates with some kind of scientific underpinning…

T. Byram Karasu, a psychiatrist at Albert Einstein/Montefiore Medical Center who treats wealthy clients, believes all very successful people share certain fundamental character traits. They have above-average intelligence, street smarts, and a high tolerance for anxiety. “They are sexual and aggressive,” he says. “They are also competitive with anyone and have no fear of confrontations; in fact, they thrive on them. And in contrast to their image, they are not extroverted. They become charmingly engaging when needed, but in their private world, they are private people.” They are, in the parlance, all business.

I’m fascinated by this stuff and I come across all kinds of contradictory examples of how affluent people behave versus how you’d expect them to behave each day. You probably do too and these episodes likely have you constantly re-evaluating your beliefs on this topic.

Make some time for this over the weekend:

The Money Empathy Gap (New York Mag)

The post Do You Have to Be an Asshole to Get Rich? appeared first on The Faster Times.

But how did we get here?

In 2008, with global markets in free-fall and the Beijing Olympics looming, the Chinese Ministry of Doing Whatever The Fuck It Wants pulled a stimulus package out of its ass so large that it represented almost 20% of the country’s GDP. We’re talking General Tso’s Shock and Awe.

And it did the trick – a little too well. Chinese real estate and infrastructure spending went banoodles, getting to the point where they were building ghost cities just to keep the machinery cranking and home prices greatly exceeded what anyone could actually afford to pay. The central government decided enough was enough and began to use policy to tamp down on the bubble. And things haven’t been the same ever since.

I turn your attention to Matt O’Brien’s piece at The Atlantic in which he lays out five reasons why China might already be in recession. Reason numero uno:

Bank lending has fallen off a cliff recently. Rather incredibly, government officials conceded that banks may miss their lending target for 2012. Remember: China still has a state capitalist model. The government sets targets for loans, and the banks have — until now — hit them. What’s the problem today? A simple lack of demand for loans. After raising interest rates and reserve requirements to rein in the bubblicious housing sector, housing prices have begun falling. That’s left developers underwater, unable to roll over what they owe, and not too keen to take out more debt despite monetary easing. Combine that Europe’s continuing flirtation with financial Armageddon — not exactly what China’s exporters want to see in their biggest market — and it’s not looking like an especially good time to borrow more.

Head over for the rest. Then look at steel, coal and oil stocks year-to-date. It’s all happening.

Source:

5 Reasons China Might Already Be in a Recession (The Atlantic)

The post Is China in a Recession? appeared first on The Faster Times.

Mission accomplished.

Last night, new allegations surfaced about how Facebook execs nonchalantly informed the underwriting banks of a coming revenue slowdown and those banks supposedly engaged in selective dissemination of that news to their biggest clients. Those clients then pulled away from the deal, leading to a rash of canceled orders and a share price that collapsed on Mom & Pop, who’d been lined up around the block for weeks to get their hands on Facebook shares for the debut.

The question arose of whether or not Reg FD might apply in this situation and I decided to take a look.

Regulation FD (Fair Disclosure) came about in the year 2000, coinciding with the boom in online trading and the democratization of stock investing. Prior to the rule, corporate executives were free to hold institutional conference calls excluding the retail public. They were also able to pass on material financial information to their favorite analysts so that earnings estimates could be “white-gloved” up or down depending on how a particular quarter was shaping up. The analysts could then incorporate that intel into their official forecasts or merely pass it on to the biggest clients of the firm to provide them with an information edge (and thus secure more trading commissions).

When the SEC proposed Reg FD, thousands of regular investors wrote in voicing support, the institutional investors fought it tooth and nail. But it passed and has been a part of the landscape these last twelve years.

Now I am (obviously) not a lawyer, but I believe it’s possible that Reg FD may not have been violated here because at the time of the disclosures Facebook was still a private company. Further, it appears that the exemption for companies engaged in a securities offering is even more protective of this kind of activity than many would have suspected…

From IR Web:

Reg FD does not apply to material information disclosed in connection with certain registered securities offerings (public offerings), including information disclosed during the course of a road show or other presentation held in conjunction with such an offering. If an offering is underwritten, the exemption period begins when the company reaches an understanding with its managing underwriter and ends when the underwriter is required to deliver a prospectus or when the securities are sold, whichever is later. If an offering is not underwritten, when the exemption period begins will depend on the type of offering that the company is conducting.

Exceptions to this exemption include certain registered securities offerings that are made on a continuous basis, for example secondary offerings—made on behalf of someone other than the company, such as when a company registers securities for resale after closing a PIPE transaction—or offerings made pursuant to a dividend reinvestment plan, interest reinvestment plan or employee benefit plan.

It’s important to understand that the exemption is limited to material information disclosed in connection with a registered securities offering. For example, if, while conducting a registered securities offering, a company’s CFO discloses material nonpublic information concerning its future financial performance to a group of analysts on a regularly scheduled conference call, that disclosure will not be considered to have been made in connection a registered securities offering just because one is ongoing.

So what went on here, while obviously immoral and unethical if true, may not have been illegal. Besides that, there have only been about a dozen or so enforcement or administrative actions taken based on Reg FD violations over the last decade, and shareholders cannot sue based solely on a violation of the rule anyway.

Wall Street 1, Muppets 0. Same as it ever was.

The post How Wall Street and Facebook Screwed Mom & Pop appeared first on The Faster Times.