Facebook: Smells Like Enron

NEW YORK (TheStreet) -- In the world of investing, people tend to see only what they want to see, which can cause a world of pain. On this turf, "what you see is what you get" has never worked. "Due diligence" rules, as corporations have become highly skilled at pretending to be something they are not. One primary example being Enron, which not only brought increased scrutiny to corporate disclosures, but generated a new breed of investors filled with pessimism and mistrust toward Wall Street.

There continues to be a fallout surrounding the Facebook(FB) IPO, where even Robert Greifeld, the CEO of Nasdaq, is offering up apologies and considering ways to repair damages to brokers who suffered losses, particularly due to Nasdaq's "technical problems," among other things. However, in typical Wall Street fashion, these same brokers insist that the financial terms that have been hinted upon are not enough to cover what has been estimated to be over $100 million in losses.

As Enron changed the world of auditing and corporate ethics, it seems Facebook will have a similar impact in the way investors view future IPOs. What's more, the company has created a much needed pessimism toward anything that is built up as "larger than life."

Enron brought about change to the extent of Sarbanes-Oxley; should there be a Facebook-Nasdaq act to require that future IPOs are examined with more scrutiny in an effort to avoid repeating this embarrassment?

If we know anything about Wall Street, it is that it will find a way to screw things up again and will want someone else to clean up the mess. As we are now on the three-week anniversary of the IPO, the stock is down 31% from its $38 opening price.

However, while we are quick to question Facebook's current valuation and point fingers at who will pay for the disappointment, no one is looking into the most important question of all: How did underwriters justify a $38 opening price? How will investors be protected in the future, particularly those who spend hours on Facebook and believe wholeheartedly in "what you see is what you get?" As much as I want to see change regarding the IPO process and more specifically how companies are valued, it is hard for me to feel sorry for anyone that lost money in this situation: It was the result of their own greed. Investors are now quick to introduce logic into the equation, suggesting that the stock's precipitous decline doesn't make sense. In fact, it makes perfect sense.