The Container Store IPO Didn't Double
The SEC needs to change the rules of the IPO process so they give individual investors a fighting chance.By Rocco Pendola, Director of Social Media
NEW YORK (TheStreet (Symbol : TST)) -- I've never been a letter-of-the-law type person. I prefer the spirit of the law (and in the night). In most aspects of life, I'll advocate for self-imposed community standards over one-size-fits-all edicts.
Along similar lines, give me a news story and I want to understand the real meaning behind what it says. How does it matter on the ground, in my life, in the lives of others and in the broad sectors of society concerned with the specific issue?
So when every news and entertainment organization in America reports, for instance, that Netflix Is In Talks With Cable, I refuse to accept the claim on blind faith. And when every other media outlet in America runs with the headline, Container Store IPO Doubles, I don't take the lead literally.
Because, in the retail trenches where most investors roam, the Container Store IPO did not double. Of course, these are similar soul-sucking trenches where investors had their heads handed to them on the Facebook (Symbol : FB) IPO.
It's easy to exonerate regulators on the FB IPO when you consider things in your rearview mirror. If the investors who got suckered into buying shares the day the stock opened only would've hung on. They'd be rich! Or something like that.
But, that sort of talk gets to the heart of the matter -- folks who bought FB at the open or thereabouts on May 18, 2012, weren't buying Facebook (Symbol : FB) the company. They were buying a lottery ticket. A chance at the type of double the media loves to hype so hard. If investors were buying the company it would not have mattered what price they paid for their shares. Buy. Hold. Check back in 18 months, which proves to have been the proper strategy.
If you recall, at the time of the Facebook IPO everybody was freaking out about the company's mobile miss and its subsequent ability to monetize the platform. But that concern didn't stop people, including quite a few folks who don't normally invest, from participating. Hope, fueled by familiarity with Facebook (Symbol : FB) and media hype, was their investment thesis. They didn't read the Facebook S-1 filing much of the media even chose to ignore. And when the stock tanked, many folks underwater on the shares did the perfect sane and logical thing, getting out of the game for good.
Now, fresh off of a "double" for Container Store (Symbol : TCS) shares, we have Twitter set to fire. As of this writing, I'll join Mike Isaac of All Things D to discuss the IPO ahead of Thursday's opening trade at 7:00 a.m. Eastern Time on CNBC's "Squawk Box."
A media-fueled dynamic, not the same, but similar to what we saw with Facebook (Symbol : FB), is at play with Twitter.
As Twitter raises its IPO offering price, the media tells us this situation is so different from Facebook's (Symbol : FB). In fact, we all, apparently, learned a lesson from Facebook (Symbol : FB)!
And then there's this notion of a "double" for TCS.
No. It didn't double for you, unless, of course, you were one of the chosen few to receive IPO shares at the offering price before the stock opened. For all intents and purposes, that leaves practically everybody out of this so-called double. Most investors bought TCS somewhere between $32.10 and $37.00 (as of this writing), which means they're nowhere near a double and have relatively modest realized and/or unrealized capital gains or losses.
But, hey, keep telling everybody the shares doubled. You can fill our collective imagination with hopes for the same performance with Twitter. And, just like we did with Facebook (Symbol : FB) and Container Store (Symbol : TCS), we'll buy shares at the open and hold our breath. That's how the stock market the U.S. Securities and Exchange Commission (SEC) describes as "fair, orderly, and efficient" at its Web site rolls.
Because the SEC's idea of fulfilling its mission "to protect investors" consists of spending countless hours busting people who trade on inside information, not playing off the agency's own words, looking out for the proverbial little guy:
As more and more first-time investors turn to the markets to help secure their futures, pay for homes and send children to college, our investor protection mission is more compelling than ever.
Bull crap. I might use that line next time my wife looks like she's in the mood.
But, wait, there's more from your friendly neighborhood regulatory agency:
The world of investing is fascinating and complex, and it can be very fruitful. But unlike the banking world, where deposits are guaranteed by the federal government, stocks, bonds and other securities can lose value. There are no guarantees. That's why investing is not a spectator sport. By far the best way for investors to protect the money they put into the securities markets is to do research and ask questions.
The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it.
Right. Facts that the SEC disseminates in the vacuum of its Web site and through a media obsessed with writing headlines about stocks doubling when, technicalities aside, the spirit of the scenario proves these stocks, most recently TCS, didn't really double after all.
Insider trading doesn't hurt investors, not even the first-timers the SEC claims to protect. Its existence doesn't change your destiny as a retail (or small institutional) investor. But the hype machine that drives misguided buys of speculative IPO shares, not sound long-term stakes in strong companies, does.
Regardless of what happens with Twitter's IPO, the SEC needs to look at the process. It doesn't matter to me if they have before or if large underwriters would balk and go cold on future IPOs governed by a new, more egalitarian set of rules. The people making money, hand over fist, under the present system really don't need the SEC in their corner.
--Written by Rocco Pendola in Santa Monica, Calif.
Rocco Pendola is a columnist and TheStreet's (Symbol : TST) Director of Social Media. Pendola makes frequent appearances on national television networks such as CNN (Symbol : TWX) and CNBC as well as TheStreet TV. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.
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