Non Sequitur by Wiley Miller for June 05, 2012

And the strange part is: The IPO is the most honest part of the whole system. At least during the IPO people are really putting money into the company (or, rather, the hands of the people running the company). During the many years and decades afterwards, people who buy and sell the stock are buying and selling pieces of paper, like baseball cards, that have little real connection to the company on a day-to-day basis.

Facebook stock dropped in price since the IPO. Does that mean Facebook lost value? Or, rather, that the people who bought at the IPO paid more than other people thought it was worth? Facebook is doing exactly the same thing for exactly the same user value that it was doing before; they didn’t change, so if the stock price changed it says more about the buyers and sellers than about the stock.