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The first thing you need to know about technology IPOs is that they are a con.

The idea behind the con is a little like this:

Shares are distributed to insiders at a discount to the initial float price. These insiders can be people who work at the company, initial investors, etc. -- but the insiders are also the investment banks underwriting the IPO, people selected by the investment banks underwriting the IPO, "special friends" who the banks have picked out to pass along a good deal., etc., etc.

All of these people are hoping for one thing and one thing only:

An astronomical instant rise in share price at the time of the public offering which allows them to dump the dump on unsophisticated "retail" investors before the price recedes.

During the dot-com boom and several times afterward, this scheme worked more or less as expected. An IPO was announced for a "hot" Internet property. The underwriting banks' PR units worked the media, the media pumped the stock, the company went public and insiders dumped shares onto naive regular folks who thought they were getting in on something at the ground floor -- and then the whole thing would bust.

The problem with the Facebook IPO was ...

Insiders couldn't find suckers to take the shares off their hands.

In fact, after an initial surge to around $45 a share, the stock began to tank, and was only kept above the initial price level by massive buying from the banks that underwrote the IPO:

At the end of the day, the banks had to buy $11 billion worth of Facebook shares, just to keep it above water. Out of $16 billion total initial float price.


And Monday won't be any better.

What does this have to do with the 1%?

Well -- when you are a parasite, frankly, you need a host to survive.

People like Mitt Romney, or banks like Goldman Sachs, are blood-suckers.

But what happens when you've already sucked your victims dry?

People just don't have the money -- or financial security -- that they need to buy into big new technology IPOs like Facebook. Who is Goldman Sachs going to dump their shares on, if normal retail investors aren't buying?

And further, how are the rest of their scams going to work?

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