Sometimes even the smart money gets it wrong.*And, boy, when it comes to Facebook, has the smart money gotten it wrong.
If you bought Facebook on the IPO and are licking your wounds and feeling like a moron, take heart: You have plenty of company. Misery loves company. So with Facebook down nearly 50% from its May IPO and a potential deluge of new insider selling about to hit the market, it’s time to take a look at some of your miserable company.
BI’s Eric Platt popped over to our Bloomberg yesterday and punched up the scorecard.
Here are some of the huge public-market investors who loaded up on Facebook last quarter and have since taken it in the teeth:
- Baillie Gifford. A massive UK-based money manager, Baillie Gifford prides itself on its “strong culture of questioning, debate, and respectful trust in which the finest investment minds are nurtured and thrive.” Maybe so. But those fine investment minds got taken to the cleaners on this one. Baillie bet ~$700 million on 19.4 million Facebook shares in and around the IPO. Those shares are now worth about $350 million.
- Fidelity. One of the world’s most respected money-managers, Fidelity manages about $1.5 trillion for clients all over the world. The firm’s research analysts are the best of the best, so Fidelity is one of the first stops for any management team looking to recruit wise, patient shareholders. Facebook’s management was apparently quite persuasive when they dropped by Fidelity’s Boston offices, because Fidelity bought 18.8 million shares of Facebook for ~$700 million in and around the IPO. If you own a Fidelity “growth fund” or “tech fund” or “balanced large cap” fund, they probably bought some Facebook for you. Oops.
- Morgan Stanley Investment Management. Investors are not happy with Morgan Stanley’s investment bankers right now, on account of the fact that several of Morgan Stanley’s recent Internet IPOs have been disastrous (think Groupon, Zynga, and Facebook). But one thing you can’t accuse Morgan Stanley of is not eating its own dog food. The poor folks at Morgan Stanley Investment Management seem to fall in love with everything Morgan Stanley’s bankers bring them, and they buy until they’ve got shares coming out of their ears. Morgan Stanley Investment Management is one of the biggest shareholders in not just Facebook but Groupon and Zynga as well. And given those holdings, MSIM actually has to be relatively pleased with Facebook, which has only lost half its value since the IPO. MSIM owns 16.4 million shares of Facebook, which used to be worth $623 million.
- UBS Global Asset Management. UBS, you will recall, got particularly hosed when NASDAQ screwed up the Facebook IPO. The firm later estimated that it lost something on the order of $500 million from the trading glitches alone. Well, it turns out that was just the beginning of UBS’s Facebook woes. The firm also bought 11.9 million shares of Facebook for its clients–a ~$450 million bet of which about $225 million remains.
- Sands Capital Management. Sands specialises in “growth companies,” which most people expected Facebook was going to be. So Sands bought 11.6 million shares of Facebook for ~$440 million. Alas, Facebook’s growth is slowing, so the value of Sands’ stake is shrinking. It’s down to about $220 million now.
You get the idea. The lure of Facebook seduced everyone, even the smartest of the smart money. Here are a few more premiere money-management pros who own so much Facebook that they find themselves in the unenviable position of being one of the company’s top shareholders:
- Blackrock. 10 million shares.
- Jennison. 9.7 million shares.
- Vanguard Group. 9.6 million shares. (Confession: I’m a Vanguard client. I love their low-cost index funds. Alas, Vanguard’s low-cost index funds appear to have loaded up on Facebook, because Facebook is an important stock in the market benchmarks. So I probably own Facebook. The only consolation for me is that I didn’t pay a huge fee to Vanguard’s research department to “select” Facebook’s stock for me. This, by the way, is a big reason why I’m such a fan of index funds. Because after 20 years in and around Wall Street, I’ve realised that even the most brilliant money managers aren’t brilliant enough to consistently beat index funds after deducting their huge fees. So I’d rather pay less and be guaranteed to beat 75%-80% of these managers, the way I do with Vanguard.)
- Janus Capital Management. 6.7 million shares.
- State Street. 6 million shares.
- T. Rowe Price. 6 million shares.
- And so on…
That’s just the first page of Facebook shareholders.
There are hundreds and hundreds more.
And they’re all really, really smart (seriously).
So if you’re feeling like a bonehead for blowing it on Facebook, take heart. You really do have a lot of very smart (and well-compensated) company.
*Actually, the smart money gets it wrong quite often–about 50% of the time, in fact. That’s because the truth is that most of money in the stock market is “smart money,” which is to say, “professionally managed money.” And when most money is smart money, being smart doesn’t help much. It’s like being a professional poker player at a table filled with professional poker players–you don’t have an edge. Being “dumb” money in the market doesn’t help, either, by the way. It just means your odds go from “likely to lose” to “almost certain to lose.” And unlike all those professional players, you don’t get paid to manage your money. So you get doubly screwed.